Due to late tax legislation, budget and debt agreements, and the 17-day government shutdown, Intuit (INTU) has lowered its second-quarter 2014 guidance. The company now expects a tax-revenue shift to the third quarter.
Intuit expects second-quarter revenues to range between $775 and $780 million (previous guidance $890–$910 million). Non-GAAP earnings are expected in the range of 1 cent–2 cents (previous 25 cents–27 cents).
Due to the shift in revenues, the third-quarter forecast will now be higher than previous estimates. During the first-quarter earnings release, Intuit projected third-quarter revenues of $2.245 billion to $2.290 billion, with earnings of $3.25 to $3.30, reflecting seasonally strong third-quarter guidance.
Despite the company’s downward revision of its second-quarter forecasts, Intuit reiterated the fiscal 2014 outlook. For fiscal 2014, the company expects revenues in the range of $4.440 to $4.525 billion, representing 6.0% to 8.0% growth. The Zacks Consensus Estimate for the period is pegged at $4.49 billion.
Non-GAAP operating income is projected at $1.58–$1.61 billion, representing 7.0% to 10.0% growth. Non-GAAP earnings per share are expected to be between $3.52 and $3.60, reflecting 10.0% to 13.0% growth, significantly higher than the Zacks Consensus Estimate of $3.17 per share.
This is reflective of Intuit’s growing small and mid-sized business (SMB) exposure and the synergies from strategic acquisitions. The higher adoption rate of its cloud-based services and products is another positive factor. Moreover, the company’s accelerated share buyback program would aid the bottom line.
However, competition from leading payroll solution provider Paychex Inc. (PAYX) and Automatic Data Processing (ADP) in the SMB arena, seasonality of Intuit’s tax business and the ongoing uncertainty in the economy concern us.
Currently, Intuit has a Zacks Rank #3 (Hold). Investors may instead consider Lexmark International (LXK), which sports a Zacks Rank #1 (Strong Buy).
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