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Intuit (INTU) Down 2.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Intuit (INTU - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Intuit due for a breakout? 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 drivers.

Intuit Reports Q4 Results

Intuit reported fourth-quarter fiscal 2019 results. Its non-GAAP loss was 9 cents per share, narrower than the Zacks Consensus Estimate of loss of 14 cents. Moreover, the figure was narrower than management’s guided range for a loss of 16-14 cents per share. The bottom line improved 800% on a year-over-year basis, as adjusted for the adoption of ASU 2014-09 in August last year. However, without the adjustment, the metric declined significantly from prior-year quarter’s earnings of 32 cents per share.

This tax preparation-related software maker’s revenues grossed $994 million, up 15% from the year-ago quarter’s adjusted revenues, and 1% without adjustment. The top line outpaced the consensus estimate of $961 million. Strong momentum in Online ecosystem revenues and growth in the Consumer business drove the top line.

Quarter in Detail

Segment wise, Small Business and Self-Employed Group revenues jumped 16% year over year to $905 million. This rise was primarily driven by 33% subscriber surge for QuickBooks Online, which brought the count to more than 4.5 million at the end of the fiscal fourth quarter.

Online ecosystem revenues surged 35% to $459 million. The U.S.-based subscribers of QuickBooks Online grew 25% to more than 3.2 million while international subscribers jumped 58% on a year-over-year basis to more than 1.3 million.

Within QuickBooks Online, Self-Employed subscribers increased to more than 1 million, up approximately 39% year over year. Online Services revenues grew 28%.

Intuit’s online payments business continued to be strong. Its next business-day payments service is witnessing increased adoption among customers. QuickBooks Online Accounting revenues grew 39.4% year over year.

Growing adoption of full-service payroll offering was also a positive.

Improved mobile capability of TSheets offering with new features such as GPS time-tracking was encouraging.

A solid momentum in the company’s lending product QuickBooks Capital was a positive as well. Additionally, the company’s QuickBooks Online Advanced solution, which is targeting the midmarket, seems promising.

Desktop ecosystem revenues rose 1% year over year to $446 million during the quarter. QuickBooks enterprise customers within Desktop ecosystem continued to grow steadily at a double-digit pace.

In the fiscal fourth quarter, revenues from Consumer Group jumped 7% year over year to $74 million, while the same from Strategic Partners Group grew 15% to $15 million.

TurboTax Online units grew 7% year over year while overall units increased 5%.

TurboTax Live’s customers tripled year over year, and it is likely to be accretive to the company’s Consumer business, going ahead.

Operating Results

The company posted non-GAAP operating loss of $47 million compared with a loss of $15 million in the year-earlier quarter, as adjusted to accommodate the new accounting standards.

However, excluding the adjustment, operating income was $312 million for the quarter, up 11% year over year. Operating margin expansion was maintained in the range of 20-40 basis points at 31%.

Balance Sheet and Cash Flow

Intuit exited the quarter with cash and cash equivalents of $2.12 billion compared with $2.95 billion in the previous quarter. Long-term debt was $386 million compared with $398 million in the prior quarter.

Cash used in operational activities was $2.32 billion as of Jul 31, 2019.

Full Fiscal-Year Highlights

For the full fiscal year, the company reported revenues of $6.8 billion, up 13% year over year.

Non-GAAP earnings per share of $6.75 increased 17% year over year.

In fiscal 2019, the company repurchased $561 million worth of shares with $2.7 billion remaining under its share repurchase authorization.

Moreover, a quarterly dividend of 53 cents per share, payable Oct 18, was approved.

Outlook

The company provided guidance for fiscal 2020. Revenues are projected in the range of $7.44-$7.54 billion. Non-GAAP earnings per share are anticipated between $7.5 and $7.6.
 
Non-GAAP operating income for the fiscal year is expected to be in the range of $2.52-$2.57 billion.

For the full fiscal year, Small Business and Self-Employed group is expected to grow 12-14% year over year, whereas the Consumer Group is expected to increase 9-10%. Strategic Partner Group is predicted to grow 1-2%.

For the first quarter of fiscal 2020, the company envisions revenue growth of 10-12% in the range of $1.12-$1.13 billion. It expects non-GAAP earnings within 23-25 cents per share.

Intuit expects Online Ecosystem revenues to grow more than 30% in the forthcoming quarters.

However, the company expects total QuickBooks Online subscriber growth to moderate in the near term as it continues to focus on additional services.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -154.55% due to these changes.

VGM Scores

At this time, Intuit has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth 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.

Outlook

Intuit has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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