Don't Avoid Intuit Just Because It Loves Taxes

What Happened?
Intuit (INTU) said Tuesday afternoon that it lost $0.10 per share in its recently completed October quarter. The results, which exclude acquisition costs and a loss from sales of securities, beat the Wall Street consensus forecast of a $0.16 loss, according to First Call. Including those costs, Intuit lost $0.16 per share.

What It Means for Investors
There’s much for investors to like about Intuit’s results. In addition, we believe it could be an opportune time to buy stock in the software maker because the shares started to slide Tuesday morning shortly after Standard & Poor’s announced that it had picked another company besides Intuit to fill a soon-to-open slot in the S&P 500 Index. Investors had been bidding up the company’s shares in anticipation that mutual funds would soon be forced to start carrying the stock in their indexed portfolios. With that hope gone, investors started dropping Intuit, and the slide continued after Intuit failed to hype its near-term prospects during a conference call with analysts. But the company remains fundamentally sound, and we see no reason Intuit won’t meet its fiscal-year targets of 22% revenue growth and 30%--or better--pro forma earnings growth. Though the company’s October quarter is typically the slowest because of the cyclic nature of when consumers buy Intuit’s flagship tax software, the company showed signs that it’s succeeding in becoming more diversified and more profitable over the long term.

Most importantly from a long-term perspective, Intuit is achieving its goal of building its Internet business--Quicken.com--into a wide-ranging financial-services provider with offerings such as home loans and insurance. The company’s Web business during the quarter increased 42% from the prior year and now accounts for 27% of Intuit’s revenues. Internet ventures aside, business is looking good in the shrink-wrapped-software department during the critical upcoming two quarters, which typically account for 70% or more of Intuit’s annual revenues. Intuit is on schedule to deliver its updated TurboTax software within the next couple of weeks, and it probably will attain improved product pricing this year with Microsoft (MSFT) backing away from the business. Plus, Intuit is slated soon to roll out the most significant update of its QuickBooks small-business-accounting software in years.