Intuit (INTU), the parent of TurboTax, Mint and Quickbooks accounting software has seen its stock climb 22% year to date. But growth may be harder to come by in the quarters ahead. Yet that might not be as bad as it sounds.
The financial software giant is set to report fourth quarter fiscal 2020 earnings results after the closing bell Tuesday. Intuit has experienced impressive growth, driven by a surge in online subscribers and paid members. But there are now more risks. For example, a second wave of COVID-19 infections and business closures could impeded growth within the company’s two largest business segments.
The company’s Small Business and Self-Employed Group and Consumer and Strategic Partner Group — are likely both in the crosshairs of the pandemic-induced recession. And given that both segments produced double-digit revenue growth in the recent fiscal year, they are likely to decline due to the rise of not only unemployment, but also the rate at which business closures/bankruptcies are taken place in the United States.
What’s more, it is now less certain that Intuit’s proposed $7 billion acquisition of Credit Karma will be a done deal. The deal is now under review by the U.S. Department of Justice which has raised concerns about possible antitrust issues. All of that aside, Intuit management still believes the company can attain 200 million customers across its entire products portfolio to achieve its five-year growth plan. But these near-term issues, which may pressure its fiscal 2020 revenue growth forecasts, will be the main topics analysts focus on.
For the quarter that ended July, Wall Street expects the Mountain View, California-based company to earn $1.04 per share on revenue of $1.56 billion. This compares to the year-ago quarter when earnings it posted a loss of 9 cents per share on revenue of $994 million. For the full year, earnings are projected to rise 5% year over year to $7.10 per share, while full-year revenue of $7.41 billion would rise 9.2% year over year.
With its easy to use cloud-based software products geared toward accounting, small business money management and personal finance, Intuit has built a strong customer base. But as I noted, the pandemic has caused some disruption evidenced by the meager 1% rise in revenue in the first three quarters of fiscal 2020 which has resulted in 11% decline in earnings per share. The company also cited the delayed tax deadline, which this year moved into its fourth quarter.
Accordingly, revenue should see a significant boost during the quarter, including increased demand from businesses re-opening. Consensus estimates calls for revenue to rise 9%, while earnings are expected to rise 5%. It remains to be seen whether Intuit — which relies on small business and self-employed customers — can meet these projections and offer any guidance at all given the uncertainty surrounding an available vaccine and double-digit unemployment.
All told, the company’s steady growth, consistent executions and its brand loyalty with customer still makes Intuit one of the better software stocks to own. But on Tuesday investors will want some level of assurance that the trough of the core business has peaked, if not stabilizing.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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