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Bear Of The Day: Intuit (INTU)

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Intuit (INTU - Free Report) is a Zacks Rank #5 (Strong Sell) despite recently beating the Zacks Consensus Estimate.  Stocks that meet or beat the number don’t often fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.

Description

Headquartered in Mountain View, CA, Intuit Inc. is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers and accounting professionals globally.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

In the case of INTU, I see four straight beats of the Zacks Consensus Estimate.  This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.

The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.

Earnings Estimates

The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower.  For MFCE I see estimates fluctuating.

This quarter has dipped from  $1.10 to $0.97.

Next quarter has moved from $1.35  to $1.42 over the last 30 days.

The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is negative for those numbers.

The 2021 consensus number has increased from $10.84 to $11.05.

The 2022 number has moved from $12.86 to $12.85 over the last 30 days.

Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).

It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions.  That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).

Chart

Intuit Inc. Price, Consensus and EPS Surprise

Intuit Inc. Price, Consensus and EPS Surprise

Intuit Inc. price-consensus-eps-surprise-chart | Intuit Inc. Quote


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