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Buy Intuit (INTU) Stock Heading into Earnings?

Benjamin Rains

Intuit INTU stock is in the midst of a solid run, but its shares have cooled off a bit recently. This could set up a buying opportunity for those high on the software-as-a-service firm. Plus, quarterly earnings season has treated many tech companies well and the Dow, S&P 500, and Nasdaq all touched new highs Friday.

Intuit’s Pitch

Stocks have climbed on the back of better-than-feared quarterly results, solid U.S. jobs data, a third Fed interest rate cut, and some U.S.-China trade war progress. Meanwhile, yields on the 10-year U.S. Treasury note have climbed over the last few months, in a sign that investors’ recession fears have cooled. And Intuit operates a somewhat recession-proof business, if there is such a thing.

Intuit, which is part of the quickly growing cloud-based SaaS industry, offers a variety of financial services and it might be most famous for its online tax software, TurboTax. The Mountain View, California-based firm also offers software geared toward accounting, small business money management, and personal finance, which include QuickBooks and Mint. The company’s easy to use cloud-based offerings have helped it accumulate roughly 50 million customers globally.

 

 

 

 

Other Fundamentals

Investors will see in the chart above that INTU shares have surged over 190% in the last five years, which comes in well above its industry’s 72% average climb. Intuit stock has also outpaced its peer group’s 142% jump, which includes the likes of Salesforce CRM, VMware VMW, and Adobe ADBE.

The financial services-focused SaaS power’s stock is also up 26% in the last year. But as we mentioned at the top, INTU stock has moved somewhat sideways in the past three months, despite crushing our earnings estimate last quarter on 15% higher sales.

Intuit currently pays an annualized dividend of $2.12 per share, up 13% from last year’s $1.88 payout. INTU’s yield rests at 0.80% per share at the moment. This is nothing to write home about but it is a nice bonus for a company that still presents investors solid growth. Intuit is also part of our Computer – Software industry that rests in the top 16% of our more 250 Zacks industries.

Intuit’s valuation picture is somewhat stretched compared to its recent history, as we can see below. However, it has traded at a premium compared to its peer group for three years.

 

 

 

 

Outlook

Looking ahead, our current Zacks Consensus Estimates call for the firm’s Q1 fiscal 2020 sales to jump 10.6% from the year-ago period to hit $1.12 billion. This would mark a slowdown compared to last quarter’s 15% revenue expansion.

Peaking further down the road, Intuit’s full-year fiscal 2020 and 2021 revenues are expected to climb 10.6% and 10%, respectively. Once again, this would come in below 2019’s 13% top-line growth. Nonetheless, INTU is expected to see its 2021 sales come in at $8.26 billion and stable double-digit growth is no easy task.  

The company’s adjusted Q1 earnings figure is projected to dip 6.9% from Q1 2019 to $0.27 per share. Despite this projected setback, Intuit’s adjusted fiscal year EPS figures are projected to jump 12.5% in each of the next two years.

Bottom Line

Intuit is currently a Zacks Rank #3 (Hold) as its earnings outlook has remained unchanged recently. With that said, the firm does boast a strong history of quarterly earnings beats, including at 54% average over the trailing four periods.

INTU stock also rests about 8% off its 52-week highs. Therefore, investors who can handle some risk might consider taking a small bite out of Intuit before it reports. But playing stocks around earnings is more than difficult. Therefore, it is likely better to wait and see how Wall Street reacts and then make a move.

Intuit is scheduled to release its first quarter fiscal 2020 financial results on Thursday, November 21.

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