12:31 PM EDT, 04/03/2024 (MT Newswires) -- Paychex ( PAYX ) demonstrated resilience in Q3, offsetting lower-than-expected revenue with cost discipline, Morgan Stanley said in a note Wednesday.

The company reported fiscal Q3 adjusted earnings of $1.38 per diluted share. Revenue was $1.44 billion, lower than the $1.46 billion consensus.

The Employee Retention Tax Credit, or ERTC, caused a 3 percentage point decrease in reported management solutions growth during the quarter. This trend is expected to continue into Q4, albeit slightly reduced, Morgan Stanley said.

Despite the ERTC offset, profitability remained intact.

The brokerage said that the highlight of Paychex's ( PAYX ) Q3 earnings was a stable small and medium-sized business environment "better than bearish investors had anticipated."

Morgan Stanley maintained its equal weight rating on Paychex ( PAYX ), but reduced price target to $125 from $127.

Price: 120.68, Change: -1.40, Percent Change: -1.15