Intuit Inc. (NASDAQ:INTU) shares fell 2.3% to US$260 in the week since its latest quarterly results. It was overall a positive result, with revenues beating expectations by 3.6% to hit US$1.2b. Intuit also reported a profit of US$0.22, which was a nice improvement from the loss that analysts were predicting. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
After the latest results, the 18 analysts covering Intuit are now predicting revenues of US$7.52b in 2020. If met, this would reflect a solid 8.5% improvement in sales compared to the last 12 months. Earnings per share are expected to rise 5.7% to US$6.42. Before this earnings report, analysts had been forecasting revenues of US$7.51b and earnings per share (EPS) of US$6.63 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$279, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Intuit analyst has a price target of US$325 per share, while the most pessimistic values it at US$190. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that Intuit's revenue growth is expected to slow, with forecast 8.5% increase next year well below the historical 11%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Intuit to grow slower than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Intuit. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$279, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Intuit. Long-term earnings power is much more important than next year's profits. We have forecasts for Intuit going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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