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Can Intuit's (INTU) Q1 Earnings Benefit From Quickbooks?

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Intuit Inc. (INTU - Free Report) is set to report first-quarter fiscal 2018 results on Nov 20. The company’s revenues are likely to benefit from increasing adoption of its QuickBooks and TurboTax products. However, escalating expenses due to increased investments may hurt profitability.

QuickBooks to Drive Revenues

The company’s QuickBooks product offers financial and business management online services and desktop software to small businesses. The company has been witnessing tremendous growth in the QuickBooks online subscriber base, which is driving its Small Business Group segment’s revenues.

The business and financial software space in which Intuit operates has huge growth opportunities. Notably, there are more than 29 million small businesses in the United States, of which majority still depend on third party or accountants to conduct data-entry process, as they feel it is a tedious and complex task.

Therefore, to reach the untapped market, the company has introduced more convenient and easy-to-use version of its QuickBooks, which have been displaying remarkable results. In fiscal 2017, Intuit witnessed a 58% surge in its QuickBooks online subscribers which reached 2.38 million. QuickBooks Self-Employed subscribers also increased to 390,000 from 85,000 at the end of fiscal 2016.

The company forecasts year-over-year growth in the range of 37-42% in the QuickBooks online subscriber base. Per the Zacks Consensus Estimate, the company will end the fiscal first quarter with a subscriber base of 2.475 million, marking year-over-year improvement of 51%.

The tremendous increase in online subscriber base will continue to drive the company’s Small Business Group segment’s revenues.

TurboTax Continues to Fuel Revenues

The increasing adoption for the company’s TurboTax products — which offer income tax preparation products and services — continues to drive its Consumer Tax segment’s revenues. Notably, the segment had witnessed a 9% year-over-year increase in fiscal 2017 revenues, mainly driven by a 2% rise in TurboTax federal units and a shift in product mix.

The company’s continued focus on bringing in innovative and easy-to-use TurboTax products for different users has helped it add new customers. The analysts covering the stock expect the momentum to continue in the to-be-reported quarter as well, thereby boosting the overall top-line performance. Furthermore, the company’s TurboTax products derive high margins which will likely cushion its bottom-line results.

Elevated Expenses to Hurt Profitability

Intuit’s high costs and expenses remain a major concern. In addition, during the last quarterly earnings conference call, the company had hinted that it would increase investments in engineering and marketing to grab the growing opportunity globally. Therefore, analysts are cautious about the company’s bottom-line results.

What Does the Zacks Consensus Estimate Say?

Analysts polled by Zacks project revenues of roughly $855 million, up 9.9% from the year-ago quarter. However, earnings are projected at 5 cents per share — reflecting an estimated year-over-year decline of 23.6%.

Furthermore, our proven model does not conclusively show that Intuit is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Intuit currently carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company has an Earnings ESP of -12.73%. The combination of Intuit's Zacks Rank #3 and negative Earnings ESP makes surprise prediction difficult.

Intuit Inc. Price and EPS Surprise

 

Intuit Inc. Price and EPS Surprise | Intuit Inc. Quote

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Micron Technology, Inc. (MU - Free Report) has an Earnings ESP of +2.28% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Adobe Systems Incorporated (ADBE - Free Report) has an Earnings ESP of +0.10% and a Zacks Rank #1.

Spectrum Brands Holdings, Inc. (SPB - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #3.

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