Intuit's Mixed Bag Tears Open

TurboTax and QuickBooks sales boost the software maker's second-quarter profit, but guidance misses.
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Updated from Feb. 16

Shares of

Intuit

(INTU) - Get Report

were off sharply Friday, as the company's solid second-quarter sales and earnings report was overshadowed by weak third-quarter guidance.

The tax and accounting software maker late Thursday posted a profit of $184.9 million, up 26% year over year, and earned $1.02 a share. Total revenue, with help from solid sales of QuickBooks, was up 15% to $742.7 million.

Excluding various charges and one-time gains, Intuit earned $176.5 million, or 97 cents a share. On the same basis, analysts polled by Thomson First Call were expecting a profit of 95 cents a share on sales of $733 million.

In recent trading, shares were off $4.89, or nearly 9%, to $ 49.91.

Consumer tax revenue was up 35% to $190.3 million. Because of changes to the product , approximately $35 million of revenue in the quarter would previously been recognized in the third quarter. If it had not been shifted, consumer tax revenue would have increased by just 10%, the company said.

QuickBooks-related revenue was up 16% to $259 million. The small business-oriented accounting package benefited from

Microsoft's

(MSFT) - Get Report

entry into the marketplace, the company said. "The publicity gave the entire category a lift," CFO Kiran Patel said in an interview. Sales of QuickBooks are not expected to grow as quickly in the back half of the year, he added.

Professional Tax revenue was flat at $150.5 million, while the Intuit-branded small-business product was up 15% to $69.6 million.

Looking forward to the rest of the fiscal year, the company now expects to post revenue of $2.22 billion to $2.26 billion, which represents annual growth of 9% to 11%. Earlier guidance was for annual growth of 8% to 11%. However, Wall Street was looking for sales of $2.25 billion. Intuit is forecasting a non-GAAP EPS of $2.27 to $2.32, compared with expectations of $2.33 a share.

Looking at the current, or third quarter, Intuit narrowed its guidance, saying it now expects revenue to range from $860 million to $880 million, or a growth range of 3% to 5%. Non-GAAP EPS will range from $1.62 to $1.66. Wall Street was looking for a profit of $1.74 a share on sales of $895.5 million.

Intuit upped spending on R&D by 24%, well above the 15% rise in revenue, investing in both its core franchises and new initiatives, such as a new health care expense manager, said Patel.