Jefferies Keeps Buy Rating, PT on Intuit (INTU) Following Q3 Beat; Sees Better Op. Margin Ahead

Jefferies maintains its Buy rating and price target of $64 on Intuit (Nasdaq: INTU) following third-quarter earnings from the Mountain View, CA-based financial management software provider.

Jefferies cites results "given double-digit organic rev growth, the transition to connected services (higher rev/ user + better model visibility) and prospects for improved operating margin over time."

The firm made several observations:

• Small Business outlook implies decelerating growth. - INTU reported F3Q11 Small Business revenue of $390M, up +13% Y/Y, below our $397M (+15% Y/Y) estimate. The shortfall was driven by Financial Management Solutions and Employee Management Solutions, which came in slightly below our estimates (-5% and -3%, respectively).
  
  
• F3Q11 Consumer Tax revenue was +3% ahead of our estimate, though FY11 guidance implies modest ASP uplift. - Mgmt now expect the Consumer Tax business to grow +13% Y/Y in FY11, which implies a modest ASP uplift (2pp) given +11% Consumer Tax unit growth STD (incl. FFA). We note that in FY10, Consumer Tax units (incl. FFA) grew +10% Y/Y while INTU’s Consumer Tax business grew +15% Y/Y, implying an ASP uplift of 5pp. Mgmt commented that the Y/Y variation
  in ASP uplift is primarily related to product mix especially with the improvement in the conversion of users of free product to paid product in FY11.
  
  
• On the third-quarter beat - Cogs and opex came in slightly below our estimate ($8.0M lower), which resulted in NG operating income of 60.3% v our 59.2% estimate, though slightly lower interest/other income ($2.4M) offset some of the upside to NG EPS. The net result was a $0.05 beat of our estimate.

For more analyst coverage on Intuit, click here. For a ratings history of Intuit, click here.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
• Ross Stores, Inc. (ROST) PT Raised to $240 at Bernstein SocGen Group
• Intchains Group Ltd (ICG) PT Lowered to $2 at Benchmark Following 1H Results