Despite a slowing economy, Intuit Inc. (NASDAQ: INTU) continues to eke out growth. In the latest quarter, revenues increased 8% to $481 million.
The good news is that the company has a diversified array of revenue streams – such as with tax preparation, payroll and small business software – that have strong market positions and customer loyalty.
Unfortunately, it looks like the U.S. economy is getting worse – and that means some more weakness for Intuit. Going into the next quarter, the guidance is for revenue growth of 3% to 5%.
Essentially, there are three main drags. First, there has been a fall in merchant transaction volume, which is probably a result of the deterioration of consumer spending. Next, the number of new QuickBooks users has fallen -- perhaps a key reason is that people have a difficulty getting credit to start up businesses. Finally, there are slowdowns in segments like real estate and Quicken.
However, Intuit is well-prepared for the challenging times. The company has $747 million in the bank and is expected to generate $1 billion in operating cash flows in the current fiscal year.
What's more, Intuit plans to grab more market share, which should be easier as competitors cut back and advertising rates fall. There may even be opportunities to buy up companies at good valuations. What's more, Intuit realizes it is critical to continue focusing on customer needs – and this means investing in current and new products, which is what the company has done effectively in prior downturns.
So far in today's trading, Intuit's stock is up about 8% to $22.22.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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