Paychex shares recoup a bit; CEO comments about economy; analysts weigh in | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

At Paychex (PAYX) there’s no such thing as a free toaster.

That may sound confusing, but President and Chief Executive John Gibson brought it all together during the payroll- and human-resources-services provider’s fiscal fourth-quarter earnings call.

💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰

“I’ve said it multiple times: We’re going to continue to be disciplined about growth,” he told analysts on June 25. “That client number can be whatever you want it to be if you’re willing to spend more than the lifetime value of the customer to acquire the customer.”

“And we’re not going to go crazy with promotions,” he added. “We’re not going to give away toasters and other gadgets to try to accelerate a number that you’re going to add a client that you have to service. We’re going to continue to be aggressive in driving client growth, but we’re going to continue to also be Paychex.”

Gibson commented on a tough day for Paychex, which was the worst-performing stock in the S&P 500 after the company missed Wall Street’s sales expectations and trimmed its full-year forecasts.

Paychex CEO John Gibson shared his thoughts about the economy.

Shutterstock

Paychex CEO: Data show no sign of recession

The company in April closed the acquisition of human-capital-management-software maker Paycor for $4.1 billion cash.

Gibson told analysts that “all of the changes that we wanted to make we made in the fourth quarter.”

“And we made a strategic decision that given the distractions that were already out there, with Liberation Day and everything else in the marketplace, that now was the time to go ahead and move as quickly as we could to get everything done,” he said.

April 2 was what President Donald Trump called Liberation Day, his reveal of his tariff policy agenda..

“We certainly could have done it at a different pace that would have dragged it potentially into the first quarter of this fiscal year, but we made an election to get all of it out of the way,” he explained.

Turning to the economy, Gibson said the company was seeing a mix of both optimism and uncertainty within the market and its client base.

“Many businesses are frozen as they wait for more clarity about a number of macro issues such as tariffs, inflation and taxes,” he said. “The hard data continues to indicate that small businesses remain fundamentally healthy despite the headlines.”

A Paychex small business report showed stable employment levels with moderation in hourly wage inflation in recent months.

“Our data does not currently show any signs of recession,” the executive said. “We also see our interactions in the market that the uncertainty is prompting businesses to exercise caution when making decisions and being cautious about how much they are spending on products and services.”

He noted that Paychex in fiscal Q4 had also seen bankruptcies and financial distress increase in the market and in its client base.

“Many businesses, I think, on the edge of failure may have decided not to fight that new headwinds they see in front of them,” he said. “We also saw losses due to increases in business combinations and mergers increase more than typical.”

“We will continue to monitor the hard data and trends in the market and take the appropriate steps to position Paychex to win in any market conditions,” he said.

After the drop on June 25, Paychex shares were off 1.6% in 2025 and up 17.5% from a year earlier. At last check they were up 1.6% at $140.12.

Stifel cites confusion surrounding guidance

Following the Paychex earnings release, UBS cut its price target on Paychex to $145 from $155 and affirmed a neutral rating on the shares, according the The Fly. A “lackluster” fiscal 2026 should keep Paychex stock range-bound, UBS said.

Stifel lowered its price target on Paychex to $152 from $156, while maintaining a hold rating, stating that “confusion” surrounding fiscal 2026 guidance is “more impactful than any fundamental shifts.”

Last year’s fiscal Q4 annual price increase was instituted earlier than historical practice, which distorts the comparisons, Stifel said. The investment firm said that management reported some weakening data points, but Stifel views the installed base as stable and see no signs of pending recession.

Jefferies pared its target on Paychex to $140 from $155 and also affirmed a hold rating.

The Q4 results disappointed largely due to slower growth in organic Management Solutions revenue. Management cited multiple reasons including distractions related to integrating Paycor, Jefferies said.

However, the investment firm added, while the shares might drop further, the large post-print move and easier setup likely creates a floor against material near-term downside.