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Intuit (INTU) Down 8.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Intuit (INTU). Shares have lost about 8.7% 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 Q2 Earnings & Revenues Beat Estimates, Down Y/Y

Intuit reported second-quarter fiscal 2021 non-GAAP earnings of 68 cents per share, which beat the Zacks Consensus Estimate of 67 cents. However, the bottom-line figure plunged 41% from the year-ago quarter’s adjusted earnings of $1.16 per share.

In addition, revenues of $1.58 billion outpaced the consensus mark of $1.57 billion but declined 7% year on year.

The year-over-year declines in the top and bottom lines reflect the impact of late tax-season opening. Earlier this month, the maker of TurboTax software stated that the Internal Revenue Service (IRS) will be accepting and processing tax returns from Feb 12 this year compared with the prior year’s Jan 27.

Quarter in Detail

Segment wise, Small Business and Self-Employed Group revenues jumped 11% year over year to $1.08 billion. This rise was primarily driven by solid growth in customers for QuickBooks Online and favorable mix-shift.

Total Online Ecosystem revenues climbed 22% year on year to $644 million. QuickBooks Online Accounting revenues were up 22% year over year to $404 million. Online Services revenues, which includes payroll, payments, time tracking and capital, grew 20% year over year to $240 million.

Within QuickBooks Online payroll, a mix-shift to Intuit’s full-service offering, was a tailwind. Also, within QuickBooks Online payments, continued uptick in customer base drove revenues.

Total Desktop ecosystem revenues declined 2% year on year to $434 million in the reported quarter.

In the fiscal second quarter, revenues from Consumer Group slumped 71% year on year to $147 million.

Intuit’s non-GAAP operating income decreased to $235 million from the $384 million reported in the year-ago quarter. Non-GAAP operating margin declined to 14.9% from the 22.6% witnessed in second-quarter fiscal 2020.

Balance Sheet and Cash Flow

As of Jan 31, 2021, Intuit’s cash and investments were $2.7 billion compared with $5.8 billion as of Oct 31, 2020.

The company repurchased stocks worth $175 million during the reported quarter. Intuit has $2.2 billion remaining on its authorization.

Additionally, Intuit announced that its board of directors has approved a quarterly cash dividend of 59 cents per share to be payable on Apr 19, 2021. The newly-approved cash dividend represents a year-over-year increase of 11%.

Outlook

For the fiscal third quarter, Intuit expects revenues to increase between 53% and 55% on a year-over-year basis. Adjusted earnings for the quarter are estimated in the range of $6.75-$6.85 per share.

The company reiterated the outlook for fiscal 2021. It projects revenues in the band of $8.810-$8.995 billion, calling for year-over-year growth of 15-17%. The fiscal 2021 adjusted earnings are projected between $8.20 per share and $8.40 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Intuit has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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