Earnings Preview: Intuit to unveil upbeat Q3 results after busy tax season

Payroll solutions provider Intuit Inc. (INTU) will update the market this week about its performance during the tax season, typically a favorable period for the business. The stable demand for its services has helped Intuit post stronger than expected results in all of the trailing four quarters. The company will be publishing the third-quarter numbers Thursday after the closing bell.

The Small Business & Self-Employed segment continues to drive overall growth, aided by the steady expansion of subscriber growth for the QuickBooks Online service, and the trend will be sustained in the third quarter. Also, ever since Turbo Tax Live made tax filing easier for consumers, the popularity of the service increased. Another contributing factor is the steady uptick in professional tax revenues and expansion of the small business ecosystem.

OUTLOOK

Wall Street is optimistic about the company maintaining the positive momentum, and predicts a 12% annual increase in earnings to $5.41 per share for the third quarter. The estimate for revenues is $3.23 billion, up 11% from last year. It needs to be noted that Intuit’s business is seasonal, which usually reaches a peak in the initial months of the year when taxpayers prepare financial reports.

Wall Street is optimistic about the company maintaining its positive performance and predicts a 12% earnings growth

The forecast falls at the higher end of the management’s guidance for the period. The QuickBooks Online service is estimated to have expanded by a third this time, in terms of both revenue and subscriber count. In the second quarter, adjusted earnings jumped 19% to $1 per share on revenues of $1.5 billion, which is up 12% from to the year-ago quarter.

Related: H&R Block reports Q3 financial results

HEADWINDS

Though the business recovered after a weak start to the tax season this year, the drifting of customers to alternative services amid growing competition is likely to have impacted performance in the to-be-reported quarter.  

The market’s bullish outlook on Intuit, with estimates for double-digit earnings growth in the next couple of years, shows the high-value stock is poised for further growth. The majority of the analysts covering the company have assigned buy rating on the stock. The average target price is around $265.

Last week, Intuit’s shares climbed to an all-time high, after gaining steadily since the beginning of the year. Over the past twelve months, the stock moved up 25%.

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