Can This Software Company Breakout On Earnings?
Estimize | Aug 23, 2016 09:13AM ET
Intuit Inc (NASDAQ:INTU)
Information Technology - Software | Reports August 23, After Market Closes
Key Takeaways
- The Estimize consensus is calling for flat earnings on $738.57 million in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top
- Intuit has seen steady growth in recent quarters from greater adoption of its cloud computing software
- Intuit is putting a greater focus on its QuickBooks brand to carry growth in the long term
Intuit is prepared to cap off its fiscal 2016 when it reports fourth quarter earnings tomorrow afternoon. With tax season now behind us, expect a significant drop off from the prior quarter. The company generates a majority of its sales during the quarter which includes tax season and the turn of most fiscal calendars. That doesn’t mean this quarter will be a complete flop. In fact, expectations are shaping up quite nicely for Intuit’s report tomorrow.
Analysts at Estimize are calling for flat earnings, 94% higher than the same period last year. That estimate has been revised down 4% since Intuit last reported in may. Revenue for the period is estimated to increase 6% to $738.57 million. Shares are up nearly 17% year to date but historically remain flat after an earnings report
Intuit’s recent string of success has been driven by increasing demand and subscriptions for its suite of cloud computing software. Intuit has successfully transitioned away from its licensed based service towards cloud-focused services. Currently, reports two core segments: small business and consumer and professional tax.
QuickBooks success continues to steer the small business segment. Last quarter total small business sales increase 12% supported by a 60% jump in Quickbooks online subscribers. Revenue from tax prep, on the other hand, grew 7% in the third quarter. The company also guided fourth quarter revenue in the range of $720 to $740 million on breakeven earnings.
Increasing adoption of cloud based services and products are expected to carry growth moving forward. Moreover a greater focus on the QuickBooks brand will likely pressure near term margins but lead to substantial long term benefits. This includes the recent launch of QuickBooks financing, similar to Square (NYSE:SQ) Capital, which connects lenders and borrowers in a seamless fashion.
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The biggest concerns now and in the future come from rising competition in specifically from payroll solution providers such as Paycom Soft (NYSE:PAYC) and Automatic Data Processing Inc (NASDAQ:ADP). From a tax perspective, H&R Block (NYSE:HRB) is right there with Intuit in terms of tax preparation services
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