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Where to Focus When Intuit Reports Earnings

By Asit Sharma – Aug 15, 2019 at 11:49AM

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With a lucrative tax season in the rearview mirror, execution is a priority as the company rounds out its fiscal year.

Despite recent market volatility, Intuit (INTU 1.26%) still boasts an impressive share price trajectory in 2019. The titan in small-business accounting and tax software has seen its stock appreciate 36% year to date.

The company reports on its fiscal fourth quarter 2019 on Aug. 22. Let's review crucial numbers and key overarching storylines investors should be aware of before Intuit's year-end report.

The numbers: progress and projections

Intuit wrapped up a profitable tax season during its fiscal third quarter, which ended April 30. Net income jumped 16% to nearly $1.4 billion, bringing total net earnings for the first nine months of the year to $1.6 billion. Volume growth of 7% in TurboTax (Intuit's flagship online tax product) was supplemented by continued brisk expansion in the company's small-business and self-employed segment, which increased its top line by 19% year over year. 

Given this context, investors are likely to look favorably on crisp execution in the last three months of the year as it strives to meet its own guidance targets. For the fourth quarter, management forecast 10% to 12% revenue growth over last year's top line of $988 million. At the midpoint of this range, Intuit will book revenue of $1.097 billion. The company anticipates a loss per share in the traditionally slow fourth quarter of $0.33 to $0.35.

Last quarter's strong performance allowed management to bump up its full-year financial guidance. For fiscal 2019, it expects 12% year-over-year growth, which equates to revenue of $6.74 billion to $6.76 billion. Intuit is aiming for operating income under generally accepted accounting principles (GAAP) of $1.83 billion to $1.84 billion, which will represent growth of 17% to 18%. As for earnings per share (EPS), the company has advised shareholders to expect diluted GAAP EPS of $5.72 to $5.74, which equates to year-over-year growth of 12% to 13%.

A female cafe owner smiles as a customer pays for his purchase using a tablet point of sale device.

Image source: Getty Images.

Key themes to track

Longtime followers of Intuit appreciate that steady growth over the last several years has been paced by the company's online small-business ecosystem -- namely, its QuickBooks Online (QBO) suite of products. The small business and self-employed segment, of which QBO is the primary offering, is expected to show full-year revenue expansion of 15% in fiscal 2019.

Investors should pore over QBO's metrics in the upcoming earnings report, and focus on subscriber growth. Last quarter, QBO subscribers expanded by 32% over the prior-year period to a total of 4.2 million paying users. This advance was highlighted by 25% growth in the U.S., and 55% growth internationally (i.e., excluding the U.S.).

QuickBooks Self-Employed, an increasingly popular offering within the QBO suite, increased its user base by 42% last quarter on a year-over-year basis, to 970,000 subscribers. Shareholders will be keen to see that both Self-Employed and overall QBO expansion have continued at a vigorous double-digit rate, and that management presents a similar growth framework when it outlines fiscal 2020 guidance on Aug. 22.

Intuit followers will also look for details on new product innovation. Typically in the fourth quarter, Intuit executives outline improvements to the TurboTax platform for the upcoming tax season. This year, the discussion may include artificial intelligence (AI) enhancements. Intuit has recently ramped up its investments in data analytics and AI in order to position itself as an expert (i.e. knowledge-base) platform in both tax and small business. After last quarter-end, in late May, Intuit acquired data analytics start-up Origami Logic to beef up its capabilities in this endeavor.

Intuit didn't disclose deal terms, and the acquisition isn't expected to materially affect near-term earnings. However, this type of transaction is crucial to the organization's march to acquire greater market share, and maintain revenue growth in the double digits. Shareholders can expect that management will elaborate on the Origami acquisition and its larger AI strategy in the earnings conference call, which will follow the fourth-quarter release.

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Intuit. The Motley Fool has a disclosure policy.

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