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Intuit (INTU) Updates Outlook to Reflect Credit Karma Acquisition

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Zacks Equity Research
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Intuit INTU updated the second-quarter and fiscal 2021 outlook on Monday following its successful completion of Credit Karma acquisition last week. Notably, in February, Intuit had inked an agreement to acquire Credit Karma in a cash-stock deal worth $7.1 billion.

The financial accounting and tax preparation solution provider intends to operate Credit Karma as a separate reporting segment. Intuit expects Credit Karma to add $545-$580 million to the company’s fiscal 2021 revenues. The acquisition is likely to generate segment operating income between $15 million and $35 million.

Intuit Raises Revenue Outlook

Considering the incremental revenues from the Credit Karma acquisition, Intuit raised its revenue outlook for second-quarter and fiscal 2021. The company now projects second-quarter revenues between $1.935 billion and $1.965 billion, reflecting year-over-year growth of 14-16%. During its first-quarter earnings results reported on Nov 19, it had projected revenue growth of 8-9%.

Intuit Inc. Price and Consensus

Intuit Inc. Price and Consensus
Intuit Inc. Price and Consensus

Intuit Inc. price-consensus-chart | Intuit Inc. Quote

The company raised its fiscal 2021 sales guidance range to $8.810-$8.995 billion from the $8.265-$8.415 billion estimated previously. The updated outlook reflects year-over-year growth of 15-17%, up from the earlier projection of an 8-10% increase.

Nonetheless, Intuit lowered its adjusted earnings outlook for second-quarter and fiscal 2021. The reduction in bottom-line forecasts might be due to the elevated expenses associated with the Credit Karma acquisition.

For the fiscal second quarter, the company now projects adjusted earnings per share between $1.25 and $1.31, down from the prior guidance of $1.31-$1.34. Fiscal 2021 earnings outlook has been lowered to $8.20-$8.40 per share from $8.40-$8.55.

Rationale Behind Credit Karma Acquisition

The acquisition of Credit Karma is anticipated to aid the expansion of Intuit’s customer base by adding 110 million Credit Karma customers to its existing 50-million user base. Moreover, in the recently-concluded quarter, the company recorded customer growth of 11%, which was the strongest in the past four years.

Notably, increasing demand for personal finance management solutions amid the coronavirus outbreak is expected to be a major growth driver. According to data cited by the company, with household debt in the United States reaching $14.3 trillion, 62% of American consumers are surviving paycheck to paycheck, while 33% have lost their sources of income during the pandemic.

The acquisition will help more than 110 million customers manage their personal finance requirements. It will enable customers to find suitable financial products, give them access to high-yield savings accounts, help pay down their debts and maximize their tax refunds.

Zacks Rank & Stocks to Consider

Intuit currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include NVIDIA Corporation NVDA, Arrow Electronics ARW and Texas Instruments TXN, all carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for NVIDIA, Arrow and Texas is currently pegged at 18.3%, 9.8%, and 9.3%, respectively.

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