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Intuit (INTU) to Report Q2 Earnings: What Awaits the Stock?

Zacks Equity Research

Intuit Inc. INTU is scheduled to report second-quarter fiscal 2019 results on Feb 21.

Notably, the company’s earnings beat estimates in each of the trailing four quarters, the average positive surprise being 52.23%.

In the last reported quarter, the company’s non-GAAP earnings came in at 29 cents per share, surpassing the Zacks Consensus Estimate of 11 cents. The bottom line also soared 71% on a year-over-year basis.

The company’s revenues grossed $1.02 billion, up 12% from the year-ago quarter. The top line came above the guided range of $955-$975 million, and also outpaced the consensus estimate of $969 million.

What to Expect in Q2?

The company expects revenues within $1.470-$1.490 billion. The Zacks Consensus Estimate is pegged at $1.48 billion, which is 26.64% higher than the figure reported in the prior-year quarter.

The company anticipates non-GAAP earnings in the band of 85-88 cents per share. The consensus estimate for the same stands at 86 cents, which is 145.71% higher than the year-ago reported number.

Let's see how things are shaping up for the upcoming announcement.

Factors at Play

Intuit is benefiting from solid growth in subscriber base of QuickBooks Online, which is driving its Small Business & Self-Employed segment — the major revenue contributor.

Notably, about 29 million small businesses in the United States depend on third-party companies to deal with respective financial and accounting- related preparation. Banking on its rich product portfolio, Intuit has capitalized well on this opportunity, which is likely to reflect again in its results.

The Zacks Consensus Estimate for Quickbook’s Online subscriber base for the fiscal second quarter is pegged at 3.87 million, marking an almost 67% year-over-year improvement.

Moreover, we are optimistic about the company’s QuickBooks Online Advanced solution, which is now targeting the midmarket. Further, the redesign of QuickBooks Payments to make the discovery of critical payments functionality easier for customers, will benefit it.

The Zacks Consensus Estimate for Small Business & Self-Employed segment for the quarter stands at $804 million, 11.67% higher than the year-ago reported figure.

Furthermore, growth in TurboTax Live offering is likely to be accretive to the company’s Consumer business.

We note that, in the last reported quarter, Intuit’s consistent focus on multiservice accounting firms led to its account success with better-than-expected professional tax revenues and growth in the small business ecosystem simultaneously. This is expected to continue to aid the top line.    

However, higher operating expenses are likely to be an overhang on margins in second-quarter fiscal 2019.

The persistent decline in the PC market, and a shift in QuickBooks enterprise subscription offering from a perpetual to a term license are expected to keep the Desktop ecosystem revenues under pressure.

Stiff competition from payroll solution providers such as Paycom Software PAYC and Automatic Data Processing ADP remains a headwind.

Intuit Inc. Price and EPS Surprise

Intuit Inc. Price and EPS Surprise | Intuit Inc. Quote

What Our Model Says

Our proven model indicates that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. While Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Intuit currently carries a Zacks Rank #3 but has an Earnings ESP of -5.05%.

A Key Pick

Here is a stock, which you may consider as our model shows that it has the right combination of elements to beat on earnings in its upcoming release:

Square, Inc. SQ has an Earnings ESP of +5.95% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

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