It has been about a month since the last earnings report for Intuit (INTU - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Intuit due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Intuit Reports Solid Q1 Results
Intuit delivered impressive first-quarter fiscal 2019 results. Its non-GAAP earnings came in at 29 cents per share, surpassing the Zacks Consensus Estimate of 11 cents. The figure also soared 71% on a year-over-year basis.
This tax-preparation related software maker’s revenues grossed $1.02 billion, up 12% from the year-ago quarter. Also, the top line outpaced the Zacks Consensus Estimate of $969 million. Moreover, the metric exceeded the management’s guided range of $955-$975 million. Robust Online ecosystem revenues were a key growth driver.
Quarter in Detail
Services and Other revenues were up nearly 23.9% to $669 million while product revenues decreased 6.2% to $347 million.
Segment-wise, Small Business and Self-Employed Group revenues witnessed 11% year-over-year growth in the reported quarter to $908 million. This improvement was primarily driven by a 40.6% subscriber surge for Quickbooks Online, which brought the count to nearly 3.6 million at the end of the fiscal first quarter.
Online ecosystem revenues surged 41.6% to $371 million. Geographically, the U.S.-based subscribers of QuickBooks Online grew 35% to 2.7 million while international subscribers jumped 61% on a year-over-year basis to more than 880,000.
Self-Employed subscribers within QuickBooks online rose to around 745,000 from 425,000 in the year-ago quarter.
A solid momentum of the company’s lending product, QuickBooks Capital, and the addition of same-day payroll capability within QuickBooks Online Payroll are positives for the company.
However, QuickBooks Desktop Units Sales fell 5% to 114 units. Desktop ecosystem revenues of $537 million declined 4% year over year in the quarter under review. Nonetheless, QuickBooks enterprise customers within Desktop ecosystem grew steadily at a double-digit pace in the quarter under consideration.
For the fiscal first quarter, revenues from Consumer Group ascended 22% year over year to $90 million while the same from Strategic Partners Group climbed 6% to $18 million.
TurboTax Live offering witnessed growth and is likely to be accretive to the company’s Consumer business, going ahead. Furthermore, Intuit’s consistent focus on multiservice accounting firms led to its account success with better-than-expected professional tax revenues and growth in the small business ecosystem simultaneously.
The company posted non-GAAP operating income of $102 million compared with $65 million in the year-earlier period. Operating margin increased nearly 300 basis points to 10% during the fiscal first quarter.
Balance Sheet and Cash Flow
Intuit exited the quarter under discussion with cash and cash equivalents of $1.084 billion compared with $1.464 billion in the prior-year quarter. Long-term debt was $375 million compared with $388 million reported in the previous quarter.
Cash used in operational activities during the period was $143 million.
In the same time frame, the company repurchased more than 101 million shares with 3.1 billion remaining under its share repurchase authorization.
The company received an authorization to pay a dividend of 47 cents per share on Jan 18, 2019.
The company reiterated its guidance for fiscal 2019. Revenues are projected in the range of $6.53-$6.63 billion, representing an 8-10% increase year over year. Non-GAAP earnings per share are anticipated between $6.4 and $6.5.
In fiscal 2019, Intuit expects Small Business and Self-Employed Group to grow at 9-11%. Notably, the redesign of QuickBooks Payments to make the discovery of critical payments functionality easier for customers is beneficial. Besides, management is optimistic about the upcoming launch of next-day funding within QuickBooks Payments.
Moreover, the company with its QuickBooks Online Advanced solution is now targeting the midmarket. Notably, the solution is receiving a positive feedback from customers and expects it to gain more adoption with better functionalities added going forward.
Consumer Group is expected to grow in the range of 9-10 %. The company announced that it is building innovative solutions to better serve customers in the upcoming tax season. Moreover, its focus on expanding do-it-yourself tax segment as well as the assisted tax category with TurboTax Live is encouraging. The company also expects tax reform to be a key catalyst for the DIY category.
However, the company anticipates QuickBooks’ desktop unit to decline in single digits and desktop ecosystem revenues to be flat in fiscal 2019.
Strategic Partner Group is estimated to grow 2-4% on the back of Professional tax revenues.
For the fiscal second quarter, the company envisions revenues within $1.470-$1.490 billion. Non-GAAP operating income is predicted in the band of $290-$300 million. The company anticipates non-GAAP earnings within the bracket of 85-88 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 27.24% due to these changes.
At this time, Intuit has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Intuit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.