On its face, the fiscal fourth quarter was lackluster for Intuit (NASDAQ: INTU). There was a net loss of $61.9 million, or $0.19 per share. Revenues were up 10.5% to $478.2 million.
But, then again, this is a seasonly slow quarter. Plus, the guidance made up for things. That is, Intuit sees next quarter's revenues at $480 million to $492 million, with a net loss of $0.11 to $0.14 per share.
Actually, Intuit is in the midst of a major transition – from shrink-wrap software to on-demand offerings. In fact, the company is pushing aggressively into free products (which are monetized by add-ons and premium upgrades). For example, Intuit plans to launch FinanceWorks, which is a powerful web-based financial planning platform. The goal is to migrate users to services like bill payment and online banking.
Intuit is also getting traction with its recent acquisitions, such as with ECHO and Homestead. In fact, with Homestead, there's a big opportunity to cross-sell websites to Intuit's four million QuickBooks user base.
For the long haul, Intuit wants to invest more resources into two main categories: global and healthcare. Actually, the company is looking to Asia for growth opportunities.
Rival home improvement chains Home Depot Inc. (NYSE: HD) and Lowe's Companies Inc. (NYSE: LOW) are scheduled to report quarterly results this week. Not surprisingly, given the ongoing housing slump, analysts surveyed by Thomson Financial on average expect both companies to post earnings lower than in the same period a year ago. For Home Depot, that's 61 cents per share, down 20.8%, and for Lowe's, 56 cents per share, down 16.4%. Meanwhile, cabinet maker American Woodmark Corp. (NASDAQ: AMWD), for whom Home Depot and Lowe's are major distributors, is also expected to report lower earnings: 11 cents per share, down 67.6%.
The presidential campaigns have prompted much discussion of energy policy and alternative energy sources. Some solar-energy-related concerns are scheduled to report this week, and expectations seem to be high. Trina Solar Ltd. (NYSE: TSL) is expected to report 81 cents per share earnings, up 67.9%; ReneSola Ltd. (NYSE: SOL) is expected to post earnings of 32 cents per share, up 62.5%; and Suntech Power Holdings Co. (NYSE: STP) is expected to have earnings of 32 cents per share, up 21.9%. Even China Sunergy Co. Ltd. (NASDAQ: CSUN) is expected to have swung to a profit of 3 cents per share, from a per-share loss of 14 cents a year ago.
H&R Block (NYSE: HRB), whose colleagues include Intuit (NASDAQ: INTU) and Jackson Hewitt (NYSE: JTX), reported Q4 and full-year earnings on Monday. The numbers looked pretty good to me. For Q4, revenues increased 11% to $2.6 billion and earnings per diluted share from continuing operations increased 17% to $2.11. According to this article, analysts' expectations were beat by $0.08. For the full year, the top line expanded by 10%, coming in at $4.4 billion. Earnings per diluted share from continuing operations jumped 21% to $1.39.
The tax specialist said it worked with 23.5 million clients, the most ever in its corporate history. That's a nice indication of health for the company, I suppose, but here's a better one. The board decided to juice the dividend. The annual payment will now be $0.60 per share, translating to a 5% increase. Okay, 5% isn't too exciting, I'll grant you, but H&R Block has now increased its payments to shareholders every year for over a decade.
But, as the company stated in its release, although it intends on repurchasing shares over the next few years, it will remain "particularly disciplined" about the subject in the next fiscal year. Essentially, that means shareholders should not expect a lot of share repurchases for a while. H&R Block is reacting to the fact that it is still rebooting itself after being victimized by the subprime mortgage crisis. I'd rather hear a more aggressive stance in terms of buyback plans, but I'd say there is prudent motive in such posture given the company's state.
I recently attended the Warrillow Conference, which focuses on how to sell to the small business market. And, yes, it's a big opportunity -- with more than 27 million small businesses in the U.S. Some of the big players in the space include MasterCard (NYSE: MA), FedEx (NYSE: FDX), Intuit (NASDAQ: INTU) and so on.
Well, one of the panels at Warrillow had a group of small business owners -- and they talked about what works when trying to sell to them.
Let's take a look:
Wearing many hats: The small business owner does just about everything. In other words, time is a precious commodity. So, when pitching, make sure things are clear and concise. What are the main benefits? The costs?
More importantly, small business owners want something that is plug-and-play and doesn't require a big learning curve.
The assistant: Many small business owners have one. And, an assistant is often a gatekeeper.
In other words, it's actually a good idea to make your pitch to the assistant -- since he or she will likely relay the information to the owner.
Intuit (NASDAQ: INTU) shares are trading higher after INTU announced yesterday evening its third-quarter profits jumped 21% to $444.2 million on strong sales of its tax-preparation and accounting programs. The company posted earnings of $1.39 a share on revenue of $1.31 billion, beating analysts' expectations. Also of note was a new $600 million stock buyback plan. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on INTU.
After hitting a one-year high of $33.10 in October, the stock hit a one-year low of $25.08 in March. INTU opened this morning at $27.81. So far today the stock has hit a low of $27.56 and a high of $29.29. As of 12:20, INTU is trading at $28.50, up $1.29 (4.7%). The chart for INTUlooks bullish and steady while S&P gives INTU a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 19.0% return in just five months as long as INTU is above $25 at October expiration. Intuit would have to fall by more than 12% before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: First Solar, Pride International and EnerSys were today's noteworthy downgrades:
Friedman Billings downgraded First Solar (NASDAQ: FSLR) to Underperform from Market Perform citing margin risk concerns, as the company aggressively pursues utility-scale projects in the US. The firm said risks are not reflected in share valuation near $300 and could be a source of disappointment but could also lead to downside EPS risk.
Wachovia said Pride International (NYSE: PDE) has the least potential EPS upside vs. peers given the company has contracted the highest percentage of its floater days into 2012E. Additionally, the firm views a takeout by Seadrill as unlikely. Shares were cut to Underperform from Market Perform.
Merriman downgraded shares of EnerSys (NYSE: ENS) to Neutral from Buy as they believe the strong Q4 results were driven by a one-time benefit from lead procurement mechanics and that data does not support the company's sustained margin expansion story.
OTHER DOWNGRADES:
Citigroup lowered Intuit (NASDAQ: INTU) to Hold from Buy.
UBS downgraded Nucor (NYSE: NUE) to Neutral from Buy.
Smart Modular (NASDAQ: SMOD) was downgraded at Oppenheimer to Perform from Outperform.
The Airlines Sector was cut by Soleil to Neutral from Outperform.
Bessemer Venture Partners, which is the oldest VC firm in the US, has picked many winners such as Skype, VeriSign (NASDAQ: VRSN) and LinkedIn. So, what does the firm like right now? Well, one sector is on-demand business applications.
In fact, this week the firm led a $15 million investment in Intacct, which operates a web-based ERP system. In all, the firm has raised $29 million in the past nine months.
"We focus on small and mid size companies," said Marc Linden, Intacct's CFO, in an interview with me. "It's for those businesses that are graduating from Intuit's (NASDAQ: INTU) QuickBooks. And we estimate the market size at $7 billion."
No doubt, there are some tough competitors, such as NetSuite (NYSE: N). But with such a large market size, there should be room for a variety of players.
And what about the slowing economy? According to Linden, there is "no effect yet." Then again, by using an on-demand model, customers may be looking to Intacct to cut costs.
Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com).
MOST NOTEWORTHY: Amazon.com, Altria Group and Skilled Healthcare were today's noteworthy initiations:
Canaccord Adams expects Amazon.com (NASDAQ: AMZN) growth to be driven by its expanding international reach, mix shift to third-party revenue, product innovation, and category expansion. The firm initiated shares with a Buy rating and $78 target.
UBS is positive on Altria's (NYSE: MO) growth, low likelihood of downward EPS revisions, and best-in-class cash flow distribution; shares were started with a Buy rating.
Skilled Healthcare (NYSE: SKH) was initiated with an Outperform rating at Morgan Keegan, as they believe nursing home reimbursement risk is already reflected in its valuation.
OTHER INITIATIONS:
KeyBank assumed Callaway Golf (NYSE: ELY) with a Buy rating and $19 target.
Credit Suisse initiated Intuit (NASDAQ: INTU) with an Outperform rating and $35 target.
Broadpoint initiated Novell (NASDAQ: NOVL) with a Buy rating.
Intuit (NASDAQ: INTU) is scheduled to report Q2 EPS on February 21. Soleil Securities says: "We continue to see double-digit core-business growth, with expanding margins."
INTU closed at $30.23 Tuesday. INTU March option implied volatility of 34 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Intuit (NASDAQ: INTU) has made a fortune by selling easy-to-use and affordable accounting software for small businesses. But competition is heating up -- which is, no doubt, a great benefit for customers.
The latest entrant is NetBooks, which recently raised about $9 million in a Series A round. The investors include CMEA Ventures and Integral Capital.
Developing accounting software is extremely complex. As a result, it took NetBooks about four years to create its offering. Interestingly enough, the company's founder, Ridgely Evers, was the mastermind of Intuit's QuickBooks.
With NetBooks, a small business can accomplish things like sales management, customer relationship management (CRM), vendor management, and so on.
And since it uses an on-demand approach, NetBooks is fairly easy to implement and does not require large information technology (IT) expenses.
But the big test will be the upcoming IPO of rival NetSuite. If it's a success, I think we'll likely see more companies like NetBooks hit the market.
If you want to check out more venture fundings, click here.
Target (NYSE: TGT) September implied volatility of 48 above 26-week average of 26. TGT will report EPS on August 21st. TGT William Ackman's Pershing Square owns a 9.6% position in TGT. TGT September option implied volatility of 48 is above its 26-week average of 26 according to Track Data, suggesting larger price risks.
Intuit (NYSE: INTU) September implied volatility at 40 into 8/22 EPS. INTU is expected to report an EPS loss 5 cents on 8/22 according to Thomson First Call. INTU will hold an analyst day on 9/27. INTU Quicken Personal Finance Software 2008 will be available for purchase at www.quicken.com on 8/27/07 and in stores on 9/9. INTU September option implied volatility of 40 is above its 26-week average of 29 according to Track Data, suggesting larger risk.
Dell (NYSE: DELL) September implied volatility at 42, November at 34 into EPS. DELL is recently trading up $0.07 to $26.01. DELL will announce second quarter EPS on 8/30/07. Goldman Sachs says: "we expect more volatility in DELL's shares going forward driven by a larger divergence between reported earnings and consensus as DELL shifts its focus away from short-term earnings management to longer-term progress." DELL September option implied volatility of 42 is above its 26-week average of 27 according to Track Data, indicating larger price fluctuations.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
MOST NOTEWORTHY: The machinery industry, Sohu.com (SOHU), Intuit (INTU), Priceline.com (PCLN) and Expedia (EXPE) were today's noteworthy initiations:
JP Morgan assumed coverage of 5 machinery stocks: The firm assumed Eaton (NYSE: ETN) and Illinois Tool Works (NYSE: ITW) with Overweight ratings and Ingersoll-Rand (NYSE: IR), Parker Hannifin (NYSE: PH) and Kennametal (NYSE: KMT) with Neutral ratings. JP Morgan's top picks in the group are Illinois Tool Works and Eaton.
Pali initiated Sohu.com (NASDAQ: SOHU) with a Buy rating and $41 target and believes the Olympic Games represent the biggest growth catalyst for the company.
Jefferies started shares of Intuit (NASDAQ: INTU) with a Buy rating and $34 target, likes the momentum in TurboTax and QuickBooks and sees potential upside fo FY08 expectations.
Banc of America initiated Priceline.com (NASDAQ: PCLN) with a Buy rating and $96 target and is positive on the company's European positioning given expectations for top line growth and margin expansion. The firm also started shares of Expedia (NASDAQ: EXPE) with a Buy rating and $35 target, positive on the company's strong management, solid competitive positioning and improving fundamentals.
OTHER INITIATIONS:
First Albany assumed coverage of Cougar Biotechnology (OTC: CGRB) with a Buy rating and $29 target.
One of the most satisfying aspects of the computer age is the way it has provided easy and inexpensive access to formerly arcane methods of personal and business finance. One of the oldest providers of the software packages that allow just about anyone to tackle these matters successfully is headquartered in Mountain View, California.
Intuit Inc. (NASDAQ: INTU) offers tax preparation (TurboTax), finance (Quicken) and accounting (QuickBooks) software for individuals, small businesses and accountants. The firm also sells online banking systems and accounting/management programs specifically applicable to the real estate, tax, construction, healthcare and wholesale industries. Among Intuit's business partnerships are alliances with Microsoft Corp. (NASDAQ: MSFT), Cigna Corp. (NYSE: CI) and Google Inc. (NASDAQ: GOOG).
The firm pleased investors last week, when it reported fiscal Q3 EPS of $1.13 and revenues of $1.15 billion. Analysts had been expecting $1.07 and $1.12 billion. Management also guided FY07 EPS to $1.38-$1.40 ($1.35 consensus) and FY07 revenues to $2.685-$2.700 billion ($2.66B consensus). Further, it announced a new stock repurchase program involving up to $800 million over the next three years.
On its face, the fiscal fourth quarter was lackluster for Intuit (NASDAQ: INTU). There was a net loss of $61.9 million, or $0.19 per share. Revenues were up 10.5% to $478.2 million. 
Rival home improvement chains 
I recently attended the 
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Intuit
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