) dropped 3.88% in after-hours trade on Tuesday after the company
reported adjusted earnings per share from continuing operations of
$3.42 in the third quarter of 2014, which missed the Zacks
Consensus Estimate of $3.50. Nevertheless, earnings increased 18.8%
on a year-over-year basis.
Adjusted earnings include stock-based compensation but exclude
amortization and other one-time expense.
Intuit reported revenues of $2.39 billion which increased 14.2%
on a year-over-year basis. Reported revenues also compared
favorably with the Zacks Consensus Estimate of $2.38 billion. The
year-over-year increase was attributed to higher customer additions
and higher adoption on Intuit's cloud-based solutions.
Product revenues increased 15.2% year over year to $735.0
million, while Services and Other revenues increased 13.8% from the
year-ago quarter to $1.65 billion.
Segment-wise, Small Business Group posted 8.0% year-over-year
growth due to higher adoption rate of Intuit's cloud-based
solutions. Small Business Financial Solutions increased 4.0%,
primarily driven by higher QuickBooks revenues (up 7% year over
year). Revenues from Payments remained flat on a year-over-year
Intuit witnessed strong year-over-year subscriber growth in its
QuickBooks Online (36%), QuickBooks Desktop (up 22%) and QuickBooks
Enterprise (up 18%). The company reported 624K QuickBooks Online
subscribers at quarter-end. The rapid adoption of the QuickBooks
Online can also be gauged by the 130% surge in subscribers to 64K
outside the U.S.
Moreover, Small Business Management Solutions revenues grew 16%
while revenues from Employee Management Solutions increased 13.0%
year over year primarily due to customer growth in Online Payroll
services. Subscriber growth for Demandforce was 44%, primarily
boosted by the acquisition of CustomerLink.
Intuit reported adjusted operating income (including share-based
compensation but excluding amortization expenses) of $1.51 billion
which increased 16.5% from the year-ago period. Margins improved
120 basis points on a year-over-year basis to 63.1%. During the
same period of time, the company's total expenses increased 10.8%
year over year.
Intuit's adjusted net income from continuing operations
(including share-based compensation but excluding amortization
expenses) came in at $990.9 million or $3.42 per share compared
with $874.4 million or $2.87 per share reported in the year-ago
Intuit ended the quarter with cash, equivalents and investments
of $2.63 billion versus $1.33 billion in the previous quarter.
Long-term debt remained flat sequentially at $499.0 million.
Intuit generated $1.53 billion in cash from operations in the
first nine months of fiscal 2014. During the period, Intuit
repurchased shares worth $1.43 billion and paid $165 million as
The company has also revised its fiscal 2014 outlook. For fiscal
2014, the company expects revenues in the range of $4.475 to $4.505
billion, an increase of 7% to 8% year over year, compared with its
previous guidance of $4.440 to $4.525 billion, which represented
6.0% to 8.0% growth. The Zacks Consensus Estimate is pegged at
Non-GAAP operating income is now projected in the range of $1.58
to $1.60 billion, an increase of 7% to 9%, compared with its
earlier guidance of $1.58-$1.61 billion, representing 7.0% to 10.0%
growth. Non-GAAP earnings per share are expected between $3.54 and
$3.58, up 11% to 12% year over year versus earlier estimate of
$3.52-$3.60. The Zacks Consensus Estimate is pegged at $3.13.
However, Intuit toned down the fourth-quarter revenue as well as
earnings guidance. The company expects fourth-quarter revenues to
range between $683 million and $713 million (previous guidance $710
to $720 million) while non-GAAP earnings are expected in the range
of 6 to 8 cents (earlier guidance 11-13 cents). The Zacks Consensus
Estimate for the fourth quarter is pegged at $713 million for
revenues and a break-even for earnings.
Intuit reported encouraging third-quarter results due to strong
tax season and robust customer additions. However, the company
provided a modest guidance. We are positive on Intuit's growing SMB
exposure and believe that the strategic acquisitions will continue
to support the segment. The higher adoption rate of its cloud-based
services and products is another positive factor. Moreover, the
company's share buyback program would aid the bottom line.
However, stiff competition from the other payroll solution
providers such as
Automatic Data Processing
), seasonality of Intuit's tax business and the ongoing uncertainty
in the economy concern us.
Currently, Intuit has a Zacks Rank #2 (Buy). Investors may have
a look at
) which sports a Zacks Rank #1 (Strong Buy).
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