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Intuit (INTU) to Report Q2 Earnings: What Lies in Store?

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Intuit Inc. (INTU - Free Report) is scheduled to release second-quarter fiscal 2020 results on Feb 24.

The company expects revenues of $1.67-$1.69 billion, up 11-13% year over year. The Zacks Consensus Estimate is pegged at $1.68 billion, implying 11.74% growth from the year-ago quarter’s reported figure.

Intuit anticipates non-GAAP earnings of $1-$1.03 per share. The consensus mark for the same is pegged at $1.02 per share, indicating a year-over-year increase of 2%.

Its earnings beat estimates in the trailing four quarters, the average positive surprise being 28.16%.

Intuit Inc. Price and EPS Surprise

Intuit Inc. Price and EPS Surprise

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

Factors at Play

Intuit’s second-quarter fiscal 2020 earnings are likely to have been driven by solid growth in the Online Ecosystem aided by a growing subscriber base for Quickbooks Online. The company expects Online Ecosystem revenues to grow more than 30% in the fiscal second quarter and beyond. The Zacks Consensus Estimate of 4,952 for Quickbooks Online subscribers suggests a 27% increase from the year-ago quarter’s reported number.

Notably, the Zacks Consensus Estimate for total Online Ecosystem revenues is pegged at $518 million for the quarter, indicating a 31.5% jump from the prior-year quarter’s number.  The consensus mark for Quickbooks Online’s revenues is pegged at $319 million, suggesting a 38.1% rise from the prior-year quarter’s number.

Furthermore, growth in the TurboTax Live offering is likely to have been accretive to the Consumer tax business in the fiscal second quarter, driven by growing customer engagement. The Zacks Consensus Estimate for revenues of $509 million from the Consumer tax business indicates growth of 10.4% year over year.

Solid momentum of the company’s lending product, QuickBooks Capital, is a positive as well.

Moreover, the profitable tax season covers the fiscal second and third quarters every year. Therefore, seasonality is expected to have been a tailwind for the company’s top line in the to-be-reported quarter.

However, about 25% of the company’s Online Services unit, which includes non-integrated payroll and payment offerings, is not performing well, which is leading to a deceleration in the growth rate. This is expected to have been a headwind to the top line in the fiscal second quarter.

Besides, management expects a gradual decline in its Desktop Ecosystem. The consensus mark for Desktop Ecosystem revenues is pegged at $436 million, suggesting a 1% decline year over year.

Moreover, a shift in marketing investments in the fiscal second quarter is expected to have been an overhang on margins of the Consumer tax group.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Intuit this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Intuit has an Earnings ESP of 0.00% and a Zacks Rank #3.

Stocks to Consider

Here are a few stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season:

Broadcom Inc. (AVGO - Free Report) has an Earnings ESP of +1.72% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Optoelectronics, Inc. (AAOI - Free Report) has an Earnings ESP of +8.12% and a Zacks Rank #3.

CrowdStrike Holdings Inc. (CRWD - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank of 3.

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