UPDATE: Deutsche Bank Raises PT on Paychex on In-Line Quarter, Potential Upside

In a report published Wednesday, Deutsche Bank analyst Greg Poole reiterated a Hold rating on Paychex PAYX, and raised the price target from $35.00 to $39.00. In the report, Deutsche Bank noted, “Inline quarter; reiterates guidance. PAYX posted revs of $608m (5.1% Y/Y) and EPS of $0.44, inline with our est. of $606m (4.8% Y/Y) and $0.42 (st. at $0.43) respectively. PAYX blamed weak payroll revenues to one less processing day and remains optimistic about ramp-up in 2H14 given positive sales momentum manifested in increased presentations. The traditionally high dividend yield is down to 3.5% and with a high payout ratio, we believe there is limited room for a dividend increase. However, potential upside from an improving interest rate env., small business formation, and healthcare reform, provides support (although will take time to show in the model). Maintain Hold.” Paychex closed on Tuesday at $39.99.