RealMoney Silver - INTU Drops the Ball With Disappointing Guidance

INTU Drops the Ball With Disappointing Guidance
By Jay Somaney
RealMoney.com Contributor
2/22/2008 12:35 PM EST

Updated from 11:33 a.m. EST on Feb. 21.

Intuit (INTU) reported disappointing numbers last night after the close and the shares are suffering this morning as a result.

The company reported earnings of 40 cents per share on revenue of $834.9 million for the January quarter vs. consensus of 36 cents per share on revenue of $845.56 million. So, a nice beat on earnings and a miss on revenues.

Management lowered guidance for the April quarter to earnings between $1.31 and $1.34 per share vs. consensus of $1.61 per share. The company also lowered guidance for fourth quarter to a loss of between 5 cents and 3 cents per share. For full year 2008, management expects revenue of $3 billion to $3.05 billion vs. consensus of $3.03 billion.

Pretty disappointing indeed.

QuickBooks sales came in lighter than expected, which is the main reason for the disappointing results.

The company blamed acquisition-related costs and the lack of resolution of the R&D tax credit in this fiscal year. In addition, the company also lowered QuickBooks guidance to 0% growth.

On the flip side, consumer tax grew by 11% and is seeing strong growth in PCs and the Web.

If the company can regain momentum in its finance business and in FinanceWorks, things could begin to shape up nicely.

Intuit repurchased 8.2 million shares for approximately $250 million, with $300 million still pending to buy back.

I like the valuation at current levels, but given the disappointment from last night, the shares could be dead money for a month or so.

INTU Preview: New Guys Should Play It Safe

Intuit (INTU) will report earnings this afternoon after the close of trading.

The maker of the globally popular QuickBooks software is expected to report earnings of 36 cents per share on revenue of $845.56 million for its quarter ended January 2008. For its bread-and-butter quarter, ending April 2008, the Street currently expects earnings of $1.37 per share on revenue of $1.28 billion. For fiscal 2008 (ending July 2008), Street consensus is $1.61 per share in earnings on revenue of $3.03 billion.

Here are some questions to consider when digesting the press release and earnings call.

The company has recently raised prices in its consumer tax business unit, which accounts for over 50% of its total revenue. Will the impact on revenue from that division of the usually low ASPs be good enough to influence overall revenue?

Has the sale of the outsourced payroll business to Automatic Data Processing (ADP) had any effect on the gross-margin or operating-margin line?

Has the gross margin or operating margin been impacted by the discontinuation of the ProSeries products?

How has the change at both the CEO and CFO level affected morale and the company's plans going forward?

How are Turbo Tax sales going leading into the company's best quarter?

What are ASPs for Turbo Tax?

I am not expecting too many changes in guidance today given the recent management changes at Intuit. The new guys are probably focused on meeting the forecasts already issued by the company while they try and get their arms around what is going on and what needs to be done in the future.

The shares are trading at the well below their historical average earnings multiple of 20.5 times and are fairly cheap at current levels especially given the seasonality.

Good luck going into the earnings call this evening, whichever way you are positioned, long or short.