Intuit (INTU) Q4 Earnings Preview: What Awaits The Stock?

Intuit Inc. (NASDAQ:INTU) is expected to report fourth-quarter fiscal 2016 results on Aug 23. Last quarter, the company posted a positive earnings surprise of 7.92%. Notably, the stock has outperformed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 74.52%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

We are positive on Intuit’s growing exposure to small and medium businesses and believe that its strategic acquisitions will boost the segment. Increasing adoption of cloud-based services and products is another big positive.

Moreover, Intuit has restructured its business to focus better on QuickBooks. The company expects to continue investing in the portfolio, which will likely hit its near-term profitability but lead to substantial benefits over the long term.

The company is also concentrating on reimaging its products with the new mobile design. Its TurboTax solutions help customers prepare and file online tax returns through tablets, mobiles and desktop computers. These offerings are expected to expand its customer base, going forward.

However, we believe rising competition from payroll solution providers such as Paycom Software Inc. and Automatic Data Processing (NASDAQ:ADP) is a major concern, especially considering the seasonality of Intuit’s tax business and the ongoing economic uncertainty.

INTUIT INC Price and EPS Surprise

INTUIT INC Price and EPS Surprise | INTUIT INC Quote

Earnings Whispers

Our proven model does not conclusively show that Intuit will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 23 cents. Hence, the difference is 0.00%.

Zacks Rank: Intuit’s Zacks Rank #3, when combined with its 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of companies you may want to consider as our model shows that they both have the right combination of elements to post an earnings beat in their upcoming releases:

Workday, Inc. (NYSE:WDAY) with an Earnings ESP of +4.65% and a Zacks Rank #3.

Broadcom Limited (NASDAQ:AVGO) with an Earnings ESP of +0.87% and a Zacks Rank #3.