Foolish Forecast: Perfect Intuit-ion

Have you ever met a "perfect" stock? If not, allow me to introduce you to Intuit (Nasdaq: INTU). According to Earnings.com, the tax and small-business software maker has beaten earnings expectations the last 12 quarters. Who wants to bet that Q3 2008 will be any different? (Intuit reports tomorrow afternoon.)

What analysts say:

  • Buy, sell, or waffle? Thirteen analysts track Intuit, giving it nine buy ratings and four holds.
  • Revenues. On average, the analysts expect sales to rise 11%, to $1.29 billion.
  • Earnings. Profits are predicted to rise 18%, to $1.33 per share.

What management says:
Giving investors a taste of what to expect tomorrow, Intuit reported its sales figures for TurboTax software last month. Looks like it's going to be good news. Total TurboTax unit sales through April 16 jumped 18% in comparison to last year's tax season, with the greatest growth experienced in what you'd expect to be the highest margin products: "Web units," or tax software sold over the Internet, jumped 37%. (In contrast, "desktop units" grew a bare 1%.)

What management does:
Intuit's rolling gross and operating margins have been dropping steadily over the past year. The dramatic rise in Web unit sales, however, could show this trend reversing when tomorrow's report is released. According to Intuit's last 10-K filing with the SEC: "TurboTax Online and electronic tax filing services ... have relatively lower costs of revenue." In other words -- higher gross margins.

This could help extend Intuit's lead in operating profit margin over H&R Block (NYSE: HRB  ) , and move it toward Jackson Hewitt's (NYSE: JTX  ) superior margin of more than 30%. And assuming things hold up well on the small-business accounting side of the business, we could see a similar shifting in the margins race there as well, with Intuit pulling away from ADP (NYSE: ADP  ) and closing the gap with 30%-plus earner Paychex (Nasdaq: PAYX  ) .

Margins

10/06

1/07

4/07

7/07

10/07

1/08

Gross

82.7%

82.9%

83.0%

82.1%

81.5%

81.1%

Operating

24.4%

23.2%

25.3%

23.9%

22.9%

20.8%

Net

17.3%

15.6%

17.1%

16.5%

17.3%

15.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
While Intuit's tax and accounting businesses will dominate the headlines tomorrow, don't forget to keep an eye on the up-and-coming "financial institutions" division. It posted Intuit's strongest growth last quarter, and I continue to consider it the company's secret weapon. Just because Intuit's Digital Insight is no longer an independent rival to Online Resources (Nasdaq: ORCC  ) and S1 (Nasdaq: SONE  ) , don't forget that it's still out there, and that it's still the best in the business.

Check out how well Intuit's been doing:


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