Paychex (PAYX) is tracking toward an in-line fiscal Q2 and appears positioned for a stronger second half of fiscal 2026, supported by strong bookings momentum and cost synergies from the Paycor acquisition, RBC Capital Markets said in an earnings preview.
The brokerage said in a Thursday note that it expects fiscal Q2 revenue growth of about 18% and an adjusted operating margin near 41%, both broadly consistent with company guidance and street expectations.
The investment firm sees margin expansion in the second half as Paychex benefits from roughly $90 million in Paycor-related cost synergies, procurement savings, easing Florida health-plan headwinds within its PEO segment, and incremental revenue synergies from cross-selling.
RBC also pointed to durable revenue drivers in PEO services, including favorable Florida comps, higher health insurance premium inflation, strong bookings, and a robust pipeline. The firm noted that the hiring environment remains soft but said demand indicators across the business remain resilient.
The brokerage expects Paychex to maintain its fiscal 2026 outlook and guide fiscal Q3 results broadly in line with consensus, which models roughly 20% revenue growth. The firm views this as achievable even with the stronger second-half performance implied in the company's full-year targets.
RBC has a sector perform rating on Paychex with a $125 price target.
Shares of Paychex were up 1.4% in recent Friday trading.
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