Due to late tax legislation, budget and debt agreements, and the 17-day government shutdown, Intuit (INTU - Snapshot Report) has lowered its second-quarter 2014 guidance. The company now expects a tax-revenue shift to the third quarter.
Intuit expects second-quarter revenues to range between $775 and $780 million (previous guidance $890–$910 million). Non-GAAP earnings are expected in the range of 1 cent–2 cents (previous 25 cents–27 cents).
Due to the shift in revenues, the third-quarter forecast will now be higher than previous estimates. During the first-quarter earnings release, Intuit projected third-quarter revenues of $2.245 billion to $2.290 billion, with earnings of $3.25 to $3.30, reflecting seasonally strong third-quarter guidance.
Despite the company’s downward revision of its second-quarter forecasts, Intuit reiterated the fiscal 2014 outlook. For fiscal 2014, the company expects revenues in the range of $4.440 to $4.525 billion, representing 6.0% to 8.0% growth. The Zacks Consensus Estimate for the period is pegged at $4.49 billion.
Non-GAAP operating income is projected at $1.58–$1.61 billion, representing 7.0% to 10.0% growth. Non-GAAP earnings per share are expected to be between $3.52 and $3.60, reflecting 10.0% to 13.0% growth, significantly higher than the Zacks Consensus Estimate of $3.17 per share.
This is reflective of Intuit’s growing small and mid-sized business (SMB) exposure and the synergies from strategic acquisitions. The higher adoption rate of its cloud-based services and products is another positive factor. Moreover, the company’s accelerated share buyback program would aid the bottom line.
However, competition from leading payroll solution provider Paychex Inc. (PAYX - Snapshot Report) and Automatic Data Processing (ADP - Analyst Report) in the SMB arena, seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concern us.
Currently, Intuit has a Zacks Rank #3 (Hold). Investors may instead consider Lexmark International (LXK - Analyst Report), which sports a Zacks Rank #1 (Strong Buy).