Imagine, as Americans begin to seriously contemplate their tax situation, that they simultaneously begin to purchase software to help them prepare their returns ahead of the filing deadline. Sounds intuitive, no?
Well, you wouldn't have thought that last month, when the market hacked 10% of the value from Intuit's
And according to Intuit, the third quarter is shaping up to bring in a hefty refund. The company raised revenue projections by $20 million to a range between $880 million to $900 million. Earnings for the quarter got bumped up by $0.02 per share as well and are now expected to fall somewhere between $1.64 and $1.68, right in line with those fickle analysts who expect $1.66 a share. As a result, the market gave Intuit's stock a 6% bump into the next tax bracket.
Part of the reason for the increased guidance is the government's initiative last year that allowed taxpayers to electronically file their returns for free if they used a basic tax-prep program. While the program was restructured this time around to limit participation to low-income filers, it appears that prior users have upgraded by paying for their software this time around.
For many taxpayers, a program such as Intuit's TurboTax or TaxCut by H&R Block
While Fool contributor Seth Jayson pointed to Intuit's slipping cash flow as an area of concern, I'd also say that the company has a revolt brewing in its "Other Products" division, which includes the popular Quicken checkbook program. Though that contributes only 11% to revenues, the company's program of "planned obsolescence" with Quicken is fueling consumer wrath that may backfire.
Intuit -- like other software providers such as Microsoft
That's causing previous Quicken customers to flee in droves to shareware programs such as Moneydance. Even though Quicken generates a continuous stream of revenue for Intuit -- for the fiscal year ending in October 2005, it helped boost revenues by 15% -- the so-called "sunset policy" also creates negative goodwill that's hard to quantify initially but may eventually show up on the income statement, let alone the balance sheet.
But for right now, Intuit is reaping the benefits of the tax season's burden. And that's something that should be intuitive to any investor.
File these related Foolish articles for future reference:
- Fast and Foolish: Intuit
- Intuit's Outlook Isn't the Problem
- Intuit's Pre-Tax Pause: Fool by Numbers
- Consider Using Tax-Prep Software
Intuit and Microsoft are Motley Fool Inside Value recommendations. If you'd like a look at other cash cows before the market realizes what it's missing, a free trial is available.