We expect Intuit Inc. (INTU) to beat expectations when it reports third quarter fiscal 2014 results on May 20.
Why a Likely Positive Surprise?
Our proven model shows that Intuit is likely to beat estimates because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +1.18%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Intuit’s Zacks Rank #2 and +1.18% ESP makes us very confident about an earnings beat on May 20.
What is Driving the Better Than Expected Earnings?
Intuit’s growing small and midsize business (SMB) exposure and higher adoption rate of its cloud-based services and products are expected to lead to a positive earnings surprise in the upcoming quarter. Moreover, the company’s accelerated share buyback program would aid the bottom line.
Additionally, we believe that all Intuit’s acquisitions in the space, including Demandforce, Prestwick Services, LLC and Docstoc will continue to provide support to the segment. Further, the synergies from the acquisition will help Intuit to gain traction in the SMB segment. Thus, the deals will prove to be accretive to both margins and earnings.
Moreover, this will improve Intuit’s competitive position against the likes of Paychex Inc. (PAYX)
Other Stocks to Consider
Intuit is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 2 technology sector peers:
Infinera Corporation (INFN) with Earnings ESP of +33.33% and a Zacks Rank #2 (Buy)
BlackBerry Limited (BBRY) with Earnings ESP of +17.86% and a Zacks Rank #2