Goldman: Paychex Profit, Sales View To Hurt Stock

NEW YORK (AP) — Shares of Paychex Inc., which provides payroll and personnel services, dropped after a Goldman Sachs analyst added the stock to his "Americas Conviction Sell" list amid rising unemployment.

Analyst Julio Quinteros said in a note to investors Thursday that Paychex's shares will likely suffer after it reports its fourth-quarter earnings and forecast for 2010 on May 25.

He expects earnings per share to fall 8 percent in the fiscal year ending in May 2010 to $1.37 per share, and sales to drop 5 percent as the company's checks-per-client decline and new sales are limited.

Analysts polled by Thomson Reuters, on average, expect profit of $1.46 per share next year.

Quinteros said Goldman expects U.S. unemployment to grow to 10.5 percent in 2010 from the current rate of 9.4 percent. Paychex also focuses on small- to medium-sized businesses, which are suffering from historically low levels of confidence, he said. Higher general jobless rates, tight credit, company bankruptcies and small companies' reluctance to hire will drag down Paychex's payrolls business 6 percent for the year, weighing on its sales, Quinteros said.

He set a $23 price target on the stock, implying downside of 19 percent from Thursday's close.

In trading Friday afternoon, Paychex shares dropped $1.09, or 3.9 percent, to $27.23.