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On Thursday, Citi reaffirmed its Buy rating on Intuit (NASDAQ:INTU) stock, maintaining a $760.00 price target.
The financial software company reported first-quarter results for fiscal year 2025, surpassing revenue expectations by $143.5 million, a 4.6% increase compared to the fourth quarter's 2.0% and an improvement from the 3.2% growth observed in the last quarter. Earnings before interest and taxes (EBIT) and earnings per share (EPS) also exceeded forecasts by $53.8 million and $0.14, respectively.
The revenue beat was largely driven by Intuit's Small Business and Self-Employed Group, which outperformed expectations by $40 million, and its Credit Karma segment, which exceeded projections by $94 million. The Consumer segment also saw a modest revenue beat of $7 million.
Despite these positive results, Intuit has maintained its fiscal year 2025 revenue and EPS outlook, which is common due to the unpredictability of the tax season.
The company expects revenue to be between $18.16 billion and $18.347 billion, with growth projections of 16%-17% for its Global Business Services, 7%-8% for Consumer, and 5%-8% for Credit Karma. The EPS forecast remains unchanged at $19.16-$19.36.
However, Intuit's guidance for the second quarter was less optimistic, falling short of consensus estimates. The revenue midpoint guidance was $52.8 million lower, and the EPS was projected to be $0.67 below expectations. This shortfall is attributed to the timing of Desktop promotions within the Consumer segment.
Citi's analysis is now focused on gaining insights into the health of the small and medium-sized business (SMB) sector, understanding the factors behind the second-quarter guidance, assessing the regulatory and tax environment, evaluating the impact of artificial intelligence on sales strategies, and examining Intuit's success in expanding QuickBooks Online and TurboTax to upmarket customers. Additionally, the firm is interested in how Intuit's restructuring efforts will affect its profit margins.
In other recent news, Intuit has been the focus of several analyst ratings, with Mizuho (NYSE:MFG) maintaining an Outperform rating and projecting a margin expansion of approximately 50-100 basis points for the company by 2025.
Citi also reaffirmed its Buy rating, suggesting that the potential development of a free IRS tax filing application would have a limited impact on Intuit's business. Jefferies shares this sentiment, maintaining a Buy rating and arguing that a potential IRS mobile tax filing application poses a minor threat to Intuit.
Scotiabank (TSX:BNS) initiated coverage on Intuit, assigning a "Sector Perform" rating and recognizing the company's significant data assets. In addition, Intuit confirmed its revenue expectations for fiscal year 2025, projecting a 12 to 13 percent growth, despite a predicted $160 million revenue decrease in Q1 due to changes in the desktop ecosystem.
The company's cash and investment reserves remain strong, reported at $4.1 billion at the end of Q4. Intuit has also announced changes to its compensation program for non-employee directors, aligning director remuneration with industry standards. These are among the recent developments for the company.
InvestingPro Insights
Intuit's recent performance and Citi's reaffirmed Buy rating are supported by several key metrics from InvestingPro. The company's revenue growth of 13.34% over the last twelve months, coupled with a strong 17.4% quarterly revenue growth, aligns with the positive results highlighted in the article. Intuit's impressive gross profit margin of 79.62% underscores its efficiency in managing costs, which is crucial for maintaining profitability in the competitive software industry.
InvestingPro Tips reveal that Intuit has raised its dividend for 14 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's recent dividend growth of 33.33%, which could be attractive to income-focused investors. Additionally, Intuit's status as a prominent player in the Software (ETR:SOWGn) industry, combined with its high return over the last decade, supports Citi's optimistic outlook on the stock.
While the article mentions Intuit's strong performance, it's worth noting that the stock is trading at a high P/E ratio of 64.27, which may indicate that the market has high growth expectations for the company. This valuation metric aligns with the InvestingPro Tip suggesting that Intuit is trading at a high earnings multiple.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips that could provide further insights into Intuit's financial health and market position.
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