Earnings Preview: Intuit Inc. - Analyst Blog

Intuit Inc. (INTU) is scheduled to announce its first quarter fiscal 2011 results on November 18, and the limited estimate revisions up to this point reflect cautious sentiments on the stock.

Fourth Quarter Overview

Intuit reported fourth quarter fiscal 2010 adjusted loss per share of 11 cents, which was better than the Zacks Consensus Estimate of a loss of 17 cents. The results were hurt by higher overall costs and operating expenses and lower revenue due to seasonality. Historically, Intuit reports losses in its first and fourth quarters, when revenue from the tax business is minimal while operating expense remains unchanged.

Intuit delivered total revenue of $537.0 million in the fourth quarter, up 18.0% from the year-ago quarter and ahead of the Zacks Consensus Estimate, as well as company guidance. The growth in revenue was attributable to solid customer growth and business momentum in the Small & Medium Business (SMB) group.

Operating loss in the quarter was $64.0 million, compared to $118.0 million in the earlier-year quarter. Operating expenses surged 4.5% from the year-ago quarter and was 111.9% of the total revenue.

Intuit exited the quarter with cash, cash equivalents and investments of $1.62 billion, down from $1.35 billion in the prior-year quarter. Cash used in operations was $151.0 million, compared to $66.0 million in the year-ago quarter.

Guidance

For fiscal 2011, Intuit expects revenues to range between $3.74 billion and $3.84 billion. Operating income is expected to be in the range of $980.0 million to $1.015 billion on a GAAP basis and $1.22 billion to $1.25 billion on a non-GAAP basis. The company projects loss per share of $1.88–$1.95 on a GAAP basis and $2.36–$2.43 on a non-GAAP basis.

On segmental basis, Intuit expects SMB to grow 8% to 12% year over year in fiscal 2011. The company expects year-over-year growth of 8–12% for Consumer Tax, 4–7% for both Accounting Professional and Financial Services and 11–16% for Other businesses.

For the first quarter of fiscal 2011, Intuit expects revenues to range between $515.0 million and $525.0 million. Operating loss is expected to be in the range of $110.0–$100.0 million on a GAAP basis and $60.0–$50.0 million on a non-GAAP basis. GAAP loss per share is projected at between 25 cents and 23 cents and non-GAAP loss per share between 13 cents and 11 cents.

Agreement of Analysts

None of the 12 analysts providing estimates for first quarter 2011 and 13 analysts providing estimates for fiscal 2011 made any revisions to estimates.

The analysts are of the opinion that Intuit's October quarter is a seasonally smaller contributor to full-year results. They expect in line to slightly better results in the first quarter, driven by continued strength in the QuickBooks segment and a stabilizing SMB backdrop.

Magnitude of Estimate Revisions

The magnitude of revisions for the first quarter has also been minimal since the company reported its fourth quarter results. The Zacks Consensus Estimate for the upcoming quarter has gone down from a loss per share of 17 cents ninety days ago to 19 cents, although remaining constant over the last thirty days.

For fiscal 2011, estimates jumped from $2.03 ninety days ago to $2.10. However, over the past thirty days, estimates decreased by a penny. For 2012, estimates went up from $2.35 ninety days ago to $2.44, with no revision in estimates over the last thirty days.

Recommendation

Intuit is a leading provider of business and financial management solutions for small and medium-sized businesses, consumers, accounting professionals and financial institutions. Management is confident about gaining market share in its Small Business group and Consumer Tax business, aided by accelerating customer growth and improving revenue per customer.

Despite the expected seasonality during the first quarter, the analysts remain positive about stabilization in SMB fundamentals, an expected cyclical recovery and the possibility of a market pull-back.

Currently, Intuit has a short-term Buy recommendation, as indicated by the Zacks #2 Rank.