It has been about a month since the last earnings report for Intuit (INTU). Shares have added about 7.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Intuit due for a pullback? 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 Reports Solid Q2 Results
Intuit reported impressive second-quarter fiscal 2019 results. Its non-GAAP earnings came in at $1 per share, surpassing the Zacks Consensus Estimate of 86 cents. The figure also increased 19% on a year-over-year basis.
This tax preparation-related software maker’s revenues grossed $1.50 billion, up 12% from the year-ago quarter. The top line narrowly outpaced the Zacks Consensus Estimate of $1.48 billion. Moreover, the metric exceeded management’s guided range of $1.47-$1.49 billion. Robust Online ecosystem revenues were a key growth driver.
Quarter in Detail
Services and Other revenues were up 19.6% to $969 million while product revenues increased 0.8% to $533 million.
Segment-wise, Small Business and Self-Employed Group revenues witnessed 17% year-over-year growth. This improvement was primarily driven by a 38% subscriber surge for QuickBooks Online, which brought the count to nearly 3.9 million at the end of the fiscal second quarter.
Online ecosystem revenues surged 38%. The U.S.-based subscribers of QuickBooks Online grew 32% to 2.9 million while international subscribers jumped 56% on a year-over-year basis to more than 980,000.
Self-Employed subscribers within QuickBooks online rose to around 845,000 from 489,000 in the year-ago quarter.
A solid momentum of the company’s lending product, QuickBooks Capital is a positive.
Desktop ecosystem revenues rose 3% year over year in the quarter under review. QuickBooks enterprise customers within Desktop ecosystem grew steadily at a double-digit pace.
For the fiscal second quarter, revenues from Consumer Group jumped 11% year over year to $461 million while the same from Strategic Partners Group came within the expected growth range of 2-4%.
Within the Strategic Partner group, professional tax revenues of $208 million were down 1% year over year.
TurboTax Live offering witnessed growth and is likely to be accretive to the company’s Consumer business, going ahead.
The company posted non-GAAP operating income of $339 million compared with $294 million in the year-earlier quarter. Operating margin increased 60 basis points to 22.5%.
Intuit continued to emphasize on multi-service accounting firms, which drove its accountant success while growing the small business ecosystem.
Balance Sheet and Cash Flow
Intuit exited the quarter with cash and cash equivalents of $1.081 billion compared with $1.084 billion a year ago. Long-term debt was $363 million compared with $375 million reported in the previous quarter.
Cash used in operational activities was $198 million as of Jan 31, 2019.
In the fiscal second quarter, the company repurchased $177 million worth of shares with 3 billion remaining under its share repurchase authorization.
The company reiterated its guidance for fiscal 2019. Revenues are projected in the range of $6.53-$6.63 billion, representing an 8-10% increase year over year. Non-GAAP earnings per share are anticipated between $6.4 and $6.5.
Non-GAAP operating income for the fiscal year is expected to be in the range of $2.17 billion to $2.22 billion.
In fiscal 2019, Intuit expects Small Business and Self-Employed Group to grow at 9-11%. Total subscriber growth is expected to be moderate due to greater focus on additional services, and penetration into a broader range of customers.
Moreover, the company with its QuickBooks Online Advanced solution is now targeting the midmarket. Notably, the solution is receiving a positive feedback from customers and expects it to gain more adoption with better added functionalities.
Online ecosystem revenues are expected to grow more than 30% during fiscal 2019.
Consumer Group is expected to grow in the range of 9-10 %. The company announced that it is building innovative solutions to better serve customers in the upcoming tax season. Moreover, its focus on expanding do-it-yourself tax segment as well as the assisted tax category with TurboTax Live is encouraging. Intuit also expects tax reform to be a key catalyst for the DIY category.
However, the company expects QuickBooks’ desktop unit to decline in single digits, and desktop ecosystem revenues to be flat in fiscal 2019.
Strategic Partner Group revenues are expected to grow 2-4%.
For the fiscal third quarter, the company envisions revenue growth within 10-12%. It anticipates non-GAAP earnings within $5.35-$5.40 per share.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
Currently, Intuit has a great Growth Score of A, though it is lagging a lot on the Momentum Score front 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Intuit has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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