Intuit gains on upgrade

2 min read

Intuit rose 12 percent Wednesday following better-than-expected second-quarter earnings. One analyst upgraded the stock and others cheered the company's ability to weather an economic downturn.

The financial software developer topped analysts' earnings estimates Tuesday when it posted a second-quarter profit of $104.2 million, or 48 cents a share. Analysts were so impressed that they didn't seem to mind that the company came in shy of sales estimates of $462.6 million, with a total of $457.6 million.

Intuit (Nasdaq: INTU) shares were up $4 to $36.69 Wednesday.

Salomon Smith Barney analyst Matthew Vetto upgraded the stock to "outperform" from "neutral" Wednesday, citing the solid quarter, an improving reward-to-risk ratio and the bargain-basement price of shares. The stock is off 50 percent from November levels.

Vetto lowered his price target to $44 from $62 given the market conditions, but saw possible catalysts in the onset of tax season. Intuit will also hold an analyst meeting on March 15.

Morgan Stanley analyst Mary Meeker maintained an "outperform" rating and said "Intuit seems to have positioned itself well with its sharp focus on driving operating efficiency and shareholder value."

Despite the positive outlook, Meeker toned down revenue estimates for fiscal 2000 slightly, to $1.31 billion from $1.33 billion. She kept earnings expectations at 81 cents a share.

The company's "new, emerging businesses and renewed focus on operating efficiency makes us feel pretty good about the business outlook, especially in relation to difficult times," Meeker wrote.

Deutsche Banc Alex Brown analyst Justin Post reiterated a "strong buy" on the stock, also citing its ability to outperform its peers in a tough environment.

Post said fears that a slow start to the company's tax-related revenues are "overblown." Tax sales at retail have shown improvement over the past four weeks and online filing is up 100 percent year-over-year, he noted.

His only concern for the company is slower-than-expected Quickbooks software sales in the quarter. Post added that better-than-expected payroll and international sales, and the company's ability to make revenue guidance range in the quarter despite slower Quickbooks, are a testament to growing revenue diversity.

• The Day Ahead: Intuit's diversity pays
• Intuit tops estimates, sticks with 2001 targets >