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Intuit's Prospects Bright, but First It Must Lock Up This Quarter

Growth in its tax-software business, a good acquisition and possible inclusion in the S&P 500 are fueling a surge.

Given its recent sharp rise,


(INTU) - Get Intuit Inc. Report

is under pressure to perform Tuesday when it reports fiscal first-quarter results. But once investors are satisfied it met expectations, they'll quickly start looking ahead.

The Mountain View Calif.-based company, best known for its Quicken personal finance software and Web site, is expected to report a loss of 16 cents a share for the quarter ended Oct. 31, according to

First Call/Thomson Financial

. A year earlier, it posted a loss of 12 cents a share. Revenue is expected to come in at $185 million, up from $177 million a year earlier.

Prudential Securities

, which rates the stock a strong buy, figures the company will hit those numbers. At best, Prudential says the company could improve on the bottom line by two or three pennies and exceed revenue estimates by $10 million.

Deutsche Banc Alex. Brown

, which also rates Intuit a strong buy, sees the loss coming in a penny or two better than expected and agrees with consensus revenue estimate. (Neither firm has done recent underwriting for Intuit.)

The company's first quarter is usually a snoozer because investors look toward its fiscal second and third quarters -- as tax time rolls around and consumers buy the software maker's products like Quicken Turbo Tax. In fact, Intuit's business is so seasonal that the company typically produces all of its annual profits in the January and April quarters combined, according to its annual report.

After the company announces its results on Tuesday, analysts and investors will listen to the conference call for a few key indicators about whether Intuit is on track. They expect a couple of positive anecdotes about its acquisition of


, completed last week for $39 million in stock. The purchase of the Internet-based provider of employee services, such as human resources management, payroll and benefits, is part of Intuit's strategy to expand its small-business offerings.

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"It was a relatively cheap purchase and they have a lot of opportunity to match their customer base with these products," says Justin Post, an analyst at Deutsche Banc. Since EmployeeMatters launched its product line in August, the company hasn't contributed much to revenue yet, Post says.

Intuit's stock has climbed 57% since the end of July, in part thanks to recent

speculation that it's a likely choice for inclusion in the

S&P 500

. "There are going to be about 10 openings in the S&P over the next quarter and Intuit is a likely candidate," says Scott Appleby, an analyst at

Robertson Stephens

, who rates it a buy. (His firm hasn't done underwriting for Intuit.)

In addition, investors are expecting more growth in coming quarters. For instance, they're looking for increasing profits in Intuit's so-called e-tax businesses, including TurboTax for the Web, its electronic tax filing businesses, and its QuickBooks Internet Gateway software with built-in Web access and online accounting services. In fiscal 2000, Intuit started to record profits from these businesses for the first time.

And, as it does every year, the company will release its latest version of Quickbooks in January. The product accounts for roughly half of Intuit's revenue. "We'll be watching very carefully in January to see how this year's release of Quickbooks fares," says Appleby. Given recent sales slowdowns at electronic retailers

Circuit City

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Radio Shack


, and consumer demand in general, Appleby and others will be particularly attentive to this year's seasonal performance.

Also, analysts say don't be surprised if the company goes on a post-holiday shopping binge. With $1.5 billion in cash, Intuit has plenty of money to play with. Look for acquisitions in the small business and tax areas. Any purchases could be smart long-term moves, says Deutsche Banc's Post, but could lower earnings-per-share figures and interest income later in the near term.