Intuit's Steady Business Trends Should Continue

Intuit Inc. INTU preannounced positive F3Q results for its consumer tax business. Brean Capital’s Yun Kim maintained a Buy rating for the company, with a price target of $125. The analyst commented that the company is expected to report strong F3Q results and the positive business trends in the QuickBooks-driven Small Business Group [SBG] are likely to continue.

In its preannouncement, Intuit raised its FY16 consumer tax revenue growth guidance from 5-7 percent to 8-9 percent. “We estimate the strength in the consumer tax business was driven by software share growth (vs. professional method) and significant market share gain within the software category,” analyst Yun Kim mentioned.

Kim expected the company’s market share within the software category to have expected to 74.0 percent, from 70.5 percent a year ago.

Steady Business Trends In SBG To Continue

The analyst expects at least in-line top-line results and a strong margin performance for SBG. She wrote, “We are comfortable with F3Q QuickBooks Online (QBO) subscriber target of 1,380K (43% y/y growth), with possible upside driven by QBO Self-Employed subs and rebound in its international subs.”

Payment/payroll attach rates are likely to remain sequentially flat, mainly due to a higher mix of new QBO subs driven by Self-Employed QBOs. Kim said, however, that there is at least some upside in the SBG operating margin. She added, “In our view, pricing leverage and resilient QB Desktop (QBD) business are key margin contributors to SBG.”

Shares are currently trading at a discount to the industry average, which does not fully reflect Intuit’s robust cash flow growth potential, the analyst commented.