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Intuit (INTU) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Intuit Inc. INTU is scheduled to release third-quarter fiscal 2019 results on May 23.

Notably, the company’s earnings beat estimates in the trailing four quarters, the average positive surprise being 55.6%.

The company’s fiscal second-quarter revenues grossed $1.5 billion, up 12% from the year-ago quarter’s figure. Robust Online ecosystem revenues were a key growth driver in the last reported quarter.

What to Expect in Q3?

The company expects revenue growth in the range of between 10-12%. The Zacks Consensus Estimate is pegged at $3.24 billion, which calls for a rise of 10.61% from the year-ago quarter’s figure.

The company anticipates non-GAAP earnings in the band of $5.35-$5.40 per share. The consensus estimate for the same is pegged at $5.41, which indicates an improvement of 12.24% from the year-ago quarter’s 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 the Small Business & Self-Employed segment — the major revenue contributor. This trend is expected to drive the top line in the to-be-reported quarter.

The Zacks Consensus Estimate for Quickbooks Online’s revenues is pegged at 244 million, suggesting a rally of 36.3% year over year.

Moreover, Intuit’s online ecosystem continues to be strong and is likely to boost the top line in the fiscal third quarter, driven by growth in QuickBooks Online subscriber count.

Per the consensus mark of 4,315, QuickBooks Online subscriber count is estimated to grow around 34% year over year.

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

A solid momentum of the company’s lending product, QuickBooks Capital is a positive.

Moreover, we are optimistic about the company’s QuickBooks Online Advanced solution, which is targeting the midmarket. Further, the redesign of QuickBooks Payments, to make search of critical payments functionality easier for customers, will drive the upcoming quarterly results.

In the last reported quarter, Intuit’s focus on multiservice accounting firms led to better-than-expected professional tax revenues and growth in the small business ecosystem. This is expected to drive the top line in the quarter to be reported.    

We expect Intuit to witness strong revenue growth in fiscal third quarter, courtesy of seasonal tailwinds. Intuit’s business is seasonal in nature and typically generates stronger sales during the second and the third quarter, which are characterized by the U.S. tax season.

However, the persistent decline in the PC market is expected to build pressure on the Desktop ecosystem revenues. The Zacks Consensus Estimate for revenues in the segment is pegged at $434 million, indicating a 2.5% decline year over year.

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

Intuit Inc. Price and EPS Surprise

Intuit Inc. Price and EPS Surprise

Intuit Inc. price-eps-surprise | Intuit Inc. Quote

What Does the Zacks Model Say

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Intuit has a Zacks Rank #2 and its Earnings ESP is +0.59%.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stock to Consider

Here is a stock which you may consider as our model shows that it also has the right combination of elements to post an earnings beat in their upcoming release:

Verint Systems Inc VRNT has an Earnings ESP of +2.94% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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