Disappointing Forecast at Intuit

Intuit Inc. (INTU - Analyst Report) recently reported results for the first quarter. Revenues increased 2% to $493 million, driven by growth in core businesses.
 
Revenues from Financial Institutions segment increased 7% while Employee Management Solutions Payroll service increased 9%.
 
Loss per share came in at 10 cents, much better than the Zacks Consensus Estimate of a loss of 22 cents per share, mainly due to cost control activities undertaken by the management. The company had postponed some of its marketing costs for the quarter.
 
During the quarter, the company repurchased $300 million worth of stock in the quarter, and the board has now approved a new repurchase program of $600 million. Intuit ended the quarter with more than $1 billion in cash and investments.
 
Going forward, management expects revenues between $3.3 billion and $3.43 billion in fiscal 2010, up 4% – 8%. Earnings per share are projected between 29 cents and 32 cents. Revenues for the second quarter are projected between $800 million and $835 million, up 1% – 6%. Earnings per share are expected to come between 15 cents and 18 cents.
 
The forecast was much lower than the street estimates, leading to a 2% fall in share price after the results were announced. On the conference call, management stated that the company is yet to find a significant improvement in business sentiment among small business customers who use the company’s flagship products such as QuickBooks software and Turbo Tax programs.
 
In September, Inuit acquired California-based provider of online personal financial services Mint.com for $170 million. The transaction is expected to close during the fourth quarter of calendar year 2009. Mint.com was a direct competitor for Intuit’s Quicken Online. Alongside its Quicken Online offerings, the company intends to keep Mint.com as the primary online personal finance management service offered directly to consumers.
 
Following the exit of Microsoft (MSFT - Analyst Report) from the personal finance space, Intuit has significant opportunity to build on its market share.
 
We believe that this acquisition will strengthen the company’s position as a leading provider of fast growing consumer Software as a Service (SaaS).
 
However, given the disappointing forecast by the management, we would like to stay on the sidelines as of now. With signs of revival, the business momentum should pick up, though.
 
California-based Intuit is a leading provider of business and financial management solutions. Its flagship products and services include QuickBooks, Quicken and TurboTax.

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