It has been about a month since the last earnings report for Intuit (INTU). Shares have lost about 1.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Intuit's Q1 Earnings & Revenues Beat Estimates
Intuit reported first-quarter fiscal 2020 non-GAAP earnings of 41 cents per share, beating than the Zacks Consensus Estimate of 26 cents. Moreover, the figure was much higher than management’s guided range of 23-25 cents per share. The bottom line also improved 41% on a year-over-year basis.
Further, this tax preparation-related software maker’s revenues grossed $1.17 billion, up 15% from the year-ago quarter’s adjusted revenues. The top line also outpaced the consensus estimate of $1.12 billion. Strong momentum in Online ecosystem revenues and growth in the Consumer business drove revenues.
Quarter in Detail
Segment wise, Small Business and Self-Employed Group revenues jumped 15% year over year to $1 billion. This rise was primarily driven by solid growth in customers for QuickBooks Online, which led to a 41% year-over-year surge in accounting revenues.
Online ecosystem revenues rose 35% to $501 million. Robust growth in U.K. subscribers enabled the company to hold the top position in terms of countrywide cloud accounting subscribers.
Within QuickBooks Online payroll, a mix-shift to Intuit’s full-service offering, which is priced 75% higher than self-service, was a tailwind. Moreover, within QuickBooks Online payments, continued uptick in customer base and an increase in charge volume per customer aided revenue growth in this area. Online Services revenues grew 27%.
The company recently launched a revenue streams dashboard to help customers easily compare revenues across products and services to better understand their business performance.
A sturdy traction from 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 inched up 1% year over year to $545 million during the quarter. QuickBooks enterprise customers within Desktop ecosystem consistently grew at double-digit pace.
In the fiscal first quarter, revenues from Consumer Group improved 11% year over year to $100 million while the same from Strategic Partners Group grew 15% to $19 million, boosted by a 6% rise in professional tax revenues.
TurboTax Live is likely to be accretive to the company’s Consumer business going ahead.
The company posted non-GAAP operating income of $29 million, up 26% year over year. Operating margin expanded 100 basis points year over year to 11%.
Balance Sheet and Cash Flow
Intuit exited the quarter with cash and cash equivalents of $1.63 billion compared with $2.12 billion sequentially. Long-term debt was $373 million compared with $386 million in the prior quarter.
Cash used in operational activities was $127 million as of Oct 31, 2019.
The company reiterated its 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 full fiscal is expected in the band of $2.52-$2.57 billion.
For the full fiscal, Small Business and Self-Employed group is expected to grow 12-14% year over year whereas the Consumer Group is anticipated to increase 9-10%. Also, Strategic Partner Group is predicted to rise 1-2%.
For the second quarter of fiscal 2020, the company envisions revenue growth of 11-13% within $1.67-$1.69 billion.
It expects non-GAAP earnings in the $1-$1.03 per share bracket. This estimate accounts for a shift of marketing investments in Consumer Group into the fiscal second quarter.
Intuit expects Online Ecosystem revenues to soar more than 30% in the forthcoming quarters.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months. The consensus estimate has shifted -14.63% due to these changes.
Currently, Intuit has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Intuit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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