It has been about a month since the last earnings report for Intuit (INTU). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Intuit due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Intuit’s Q1 Earnings and Sales Beat on Expectations
Intuit reported fiscal first-quarter 2023 non-GAAP earnings of $1.66 per share, beating the Zacks Consensus Estimate of $1.19 per share. The bottom line surged 8% from the year-ago quarter’s earnings of $1.53 per share.
Revenues of $2.60 billion surpassed the consensus mark of $2.50 billion and surged 29% year over year.
Quarter Details
Segment-wise, Small Business and Self-Employed Group revenues grew 38% year over year to $2 billion. This rise was driven by the solid growth in customers for QuickBooks Online, a favorable mix-shift and the addition of Mailchimp.
Total Online Ecosystem revenues grew 60% year over year to $1.3 billion. QuickBooks Online Accounting revenues were up 29% year over year to $668 million, mainly driven by the mix-shift, higher pricing and customer growth.
Online Services revenues which include payroll, payments, time tracking and capital, soared 109% year over year to $681 million. This was driven by strong performances of the QuickBooks Online payroll and QuickBooks Online payments solutions, along with revenues from the new Mailchimp business.
Within QuickBooks Online payroll, a mix-shift to INTU’s full-service offering and the continued uptick in the customer base acted as tailwinds. Within QuickBooks Online payments, an increase in the charge volume per customer and ongoing customer growth drove revenues. Mailchimp contributed $264 million to total Online Services.
Total international Online Ecosystem revenues increased a whopping 172% year over year on a constant-currency basis and 19% on an organic basis, excluding contributions from Mailchimp.
Total Desktop ecosystem revenues grew 6.9% year over year during the reported quarter to $639 million.
In the fiscal first quarter, revenues from Consumer Group increased to $150 million from $120 million reported a year ago, mainly driven by a strong peak in new customers and extension filers in October. However, ProConnect Group’s professional tax revenues increased to $34 million from $26 million in the year-ago quarter.
The Credit Karma business contributed $425 million to Intuit’s first-quarter total revenues, up from $418 million in the year-ago quarter. The robust year-over-year growth reflects high levels of monthly active users and revenues per monthly active user. It reflects strength in credit cards offset by headwinds in personal loans, home loans, auto insurance and auto loans.
Intuit’s non-GAAP operating income climbed 19% to $662 million.
Balance Sheet and Cash Flow
As of Oct 31, 2022, Intuit’s cash and investments were $2.72 billion compared with $3.28 billion as of Jul 31, 2022.
The company exited the fiscal first-quarter with long-term debt of $6.49 billion, up from the previous quarter’s $6.42 billion.
During first-quarter fiscal 2023, Intuit generated operating cash flow worth $328 million.
Intuit repurchased stocks worth $519 million during the fiscal first-quarter and had a remaining share-repurchase authorization of $3 billion at the end of the quarter. INTU announced that its board approved a quarterly cash dividend of 78 cents per share payable on Jan 18, 2023. The newly approved cash dividend represents a year-over-year increase of 15%.
Outlook
Intuit projects fiscal 2023 revenues in the band of $14.035-$14.250 billion, indicating 10-12% growth.
The company anticipates non-GAAP operating income between $5.258 billion and $5.363 billion, indicating approximate year-over-year growth of 17-19%.
Intuit’s fiscal 2023 non-GAAP earnings per share forecast stands between $13.59 and $13.89, suggesting year-over-year increase of 15-17%.
For the fiscal second quarter, INTU expects revenues to grow between 8% and 9% on a year-over-year basis. Adjusted earnings for the quarter are estimated in the range of $1.41-$1.45 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -65.66% due to these changes.
VGM Scores
Currently, Intuit has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Intuit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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