Intuit Raises Third-Quarter Guidance

Higher margin web purchases have bulked up revenue estimates.

Author:: Ronna Abramson
Publish date:: Apr 8, 2002 12:45 PM EDT

Updated from 10:32 a.m. EDT

Shares of

Intuit

were rising Monday after the consumer software shop raised its financial guidance for the third quarter, saying sales of its tax and accounting software were better than expected.Intuit on Monday increased its third-quarter profit estimate by $15 million, or 5 cents a share, and said revenue should be at the high end of its current expectation of $520 million to $544 million. Analysts polled by Thomson Financial/First Call had been looking for earnings of 67 cents a share. A revenue estimate wasn't available. The company's third quarter ends on April 30.

The company said it raised its guidance because of the strength of QuickBooks and TurboTax software sales. Intuit said customers are shifting to direct purchases from buying products at retail outlets, and that in turn is boosting profits. Shares of Intuit were climbing 4.3% to $38.89. "A greater portion of our growth in tax

softwareis coming from the Web, another highly profitable direct channel," the company said in a press release.

Intuit didn't change its fourth-quarter guidance but said it now expects what it calls pro forma operating income of $315 million to $325 million for the full fiscal year, which would represent 43% to 48% year-over-year growth. In addition, the company didn't revise its fiscal 2002 revenue guidance, but Intuit expects revenue to be at the higher end of the current estimated range of $1.47 billion to $1.51 billion. The company generally earns the bulk of its revenue and profit in its second and third quarters. Intuit's fiscal year ends July 31.

Michael Wallace, an analyst at UBS Warburg, said he estimates margins on shrink-wrapped retail products are about 15% while Web-based products boast margins of about two to three times higher. Web-based TurboTax products are benefiting from a growing number of people filing tax returns online. In addition, competitor

H&R Block

(HRB) - Get Report

seems to be downplaying online sales, Wallace said.

"There hasn't been any material market share changes this year or the last few years," said Wallace, who has a hold on Intuit based on valuation. The company met his $42 price target in December. Wallace's firm hasn't done any banking business with Intuit.Intuit's TurboTax products grabbed the highest three spots on a list of top-selling software during the week of March 17 to March 23, according to Port Washington, N.Y.-based NPDTechworld, whose software transaction research covers 84% of the retail market. H&R Block's Taxcut products were ranked No. 5, 6 and 7.

Intuit is also reaping the rewards of launching a new version of its small business accounting product, QuickBooks, in January, Wallace added. "It's putting out good numbers," Wallace said.QuickBooks 2002 Pro was ranked the fifth highest selling business software product during the week of March 17 to March 23, the most recent period figures are available.

Staff writer Rebecca Byrne contributed to this report