Intuit's Revenue Comes Up Short

Updated from 4:41 p.m. EST

SAN FRANCISCO - The impact of a slowing economy on small businesses hit Intuit's(INTU - Cramer's Take - Stockpickr) second-quarter top line, which missed Wall Street's expectations.

Revenue at the Mountain View, Calif. maker of consumer and business software grew 11% to $834.9 million from $750.6 million in the same quarter of the prior year. Analysts polled by Thomson Financial were looking for $845.6 million.

Second-quarter profit fell to $115.2 million, or 34 cents a share, from $145.4 million, or 40 cents a share, in the year-ago period.

Excluding items, EPS was 40 cents. Analysts were expecting 36 cents a share.

The drop in expected revenue was due, in part, to the deferral of $23 million of ProTax software revenue to the third quarter, CFO Neil Williams said on a conference call.

But slowing growth in the QuickBooks accounting software line for small businesses was also a consideration, CEO Brad Smith said. While a combination of factors may be inhibiting QuickBooks sales, "the macro environment is tougher on small businesses." Many small shops operate on credit cards and home equity loans, areas where credit is tightening, Smith added.

As a result, Intuit lowered its Quickbooks full-year revenue growth guidance to a range of 5% to 7% growth, from 8% to 12% previously. For the second half of fiscal 2008, Intuit expects QuickBooks revenue of $305.7 million to $317.7 million.

"The early months of the second quarter, we saw a pretty significant shift in the run rate" of QuickBooks, Smith said. "The category is down four points, while we picked up two points of [market] share." However, the services segment of Intuit's small-business unit is performing well.

Shares of Intuit were off $1.05, or 3.5%, to $28.74.

QuickBooks revenue for the second quarter was $175.4 million, up 5% year over year. Smith said he expects Intuit to eventually benefit in an economic downturn because the newly unemployed often start their own businesses.

Smith said he expects Intuit to eventually benefit in an economic downturn because the newly unemployed often start their own businesses.

Also part of the small business unit, payroll and payments took in $138 million, flat year over year.

Consumer tax software was up 11% year over year, to $248.3 million. Financial services revenue from Intuit's 2007 Digital Insight acquisition was $72.3 million. Other business revenue was up 12% year over year, to $95.5 million.

The company reaffirmed its revenue guidance for $3 billion to $3.05 billion for the full year, but lowered full-year EPS guidance -- to $1.56 to $1.58 before items -- to reflect the acquisition of Homestead Technologies in December, and the lack of a research tax credit renewal before the end of the fiscal year.

For the third quarter, typically the strongest season for Intuit's Turbo Tax software, the company projected EPS, excluding items, of $1.31 to $1.34. Analysts were expecting $1.37.

For the fourth quarter, the company now expects a loss of 3 cents to 5 cents a share. Analysts were expecting a loss of 2 cents a share.