Intuit (NASDAQ:INTU) recently closed its Fiscal 2023, showcasing strong momentum and record-breaking results. The tax preparation software behemoth continues to benefit from its distinctive attributes, notably its dominant presence in a high-margin, recession-resistant industry. The trend toward digitalization in tax preparation also keeps propelling the company’s results. With this trajectory poised to continue, Intuit is primed for yet another year of record earnings in Fiscal 2024. Accordingly, I remain bullish on the stock.
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All-Time-High Results Solidify Intuit’s Track Record
Intuit’s outstanding history of consistently achieving record-breaking earnings year after year is nothing short of awe-inspiring. Fiscal 2023 was no different. Intuit’s performance came in very strong, highlighting the strength of its tax preparation solutions. This space is fully recession-resistant and lacks unfortunate surprises due to the unavoidable nature of preparing taxes.
The company’s success is mainly driven by impressive customer retention rates. This, along with a growing number of new small businesses, self-employed individuals, and entrepreneurs adopting Intuit’s products, enables the company to consistently achieve strong revenue growth. This is true even during challenging times in the tech industry.
Revenue Growth
In its latest Fiscal Q4 report, Intuit continued to build on its success, achieving an impressive 21% growth rate in both its “Small Business and Self-Employed Group” and “Online Ecosystem” divisions.
The success in these segments was somewhat offset by a 12% drop in revenue within the “Consumer Group” segment and a 4% drop in “Credit Karma” revenues.
In the case of the Consumer Group segment, the decline was attributed to a challenging comparison with a couple of years ago, when taxpayers filed at significantly higher rates to access pandemic-era stimulus funds and tax credits. As for Credit Karma, the revenue drop was a result of prevailing macroeconomic challenges impacting personal loans, auto insurance, home loans, and auto loans.
Nonetheless, Intuit’s top line increased at a satisfactory rate of 12%, reaching $2.7 billion. Following the contribution from Q4, Intuit booked another year of record revenues, which landed $14.4 billion, up 13% year-over-year.
Earnings Growth
Intuit was once again able to capitalize on its high-margin business model and robust revenue growth to drive improved economies of scale. While Intuit’s revenues rose by 12% for the quarter, its total costs and expenses rose by just 8.3%. Thus, Intuit’s adjusted EPS surged by 50% to $1.65. This theme was also true for its full-year results. Intuit’s Fiscal 2023 adjusted EPS grew by 22% to $14.40, exceeding the underlying revenue growth of 13% during the period.
Is Intuit’s Fiscal 2024 Outlook Too Conservative?
After celebrating an exceptional Fiscal 2023, Intuit’s management introduced its Fiscal 2024 guidance. For the year, revenues are expected to land between $15.80 billion and $16.11 billion, implying an 11.5% growth rate year-over-year at the midpoint. Adjusted EPS is expected to land between $16.17 and $16.47, also implying a satisfactory year-over-year increase of 13% at the midpoint.
While this is certainly an optimistic outlook, one has to question whether it’s actually rather conservative. This is because Intuit has historically been prudent with its initial estimates, resulting in continuous beats and raises through the course of the year.
Let’s take last year as an example. In both Q1 2023 and Q2 2023, management projected full-year adjusted EPS growth of 15%-17%. In Q3-2023, management boosted its adjusted EPS growth estimate to roughly 20%. Ultimately, adjusted EPS growth landed at 22%. This has been a consistent theme with Intuit’s financial results. Thus, it’s reasonable to expect that Fiscal 2024’s guidance may also be quite conservative.
15% Dividend Hike Bolsters Dividend Growth Story
Along with its Fiscal Q4 and full-year 2023 results, Intuit increased its dividend by 15% to a quarterly rate of $0.90. This marked Intuit’s 12th consecutive annual dividend increase. In my view, it also bolstered Intuit’s overall dividend growth story. Despite its low, sub-1% yield, Intuit remains a compelling dividend-growth pick. Its payout ratio based on the current annualized dividend rate and the midpoint of management’s guidance stands at just 22%. Thus, there is ample room for further, strong hikes ahead.
Is Intuit a Buy Right Now?
Turning to Wall Street, Intuit maintains a Strong Buy consensus rating based on 21 Buys and three Holds assigned in the past three months. At $561.05, the average Intuit stock price target implies 2% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell INTU stock, the most profitable analyst covering the stock (on a one-year timeframe) is Alex Zukin from Wolfe Research. He features a success rate of 88% and an average return of 38.77% per rating. Click on the image below to learn more.
The Takeaway
In conclusion, Intuit’s remarkable Fiscal 2023 performance underscores its unyielding strength in the tax preparation software industry. With an enviable track record of record-breaking earnings, unwavering revenue growth, and bold dividend hikes, Intuit’s investment case remains highly compelling. In fact, in an uncertain market environment, Intuit stands as a shining example of a recession-resistant, growth-oriented stock, making it an attractive choice for investors seeking both stability and potential.
As we move into Fiscal 2024, the company’s conservative guidance may once again prove to be a low estimate. Regardless, another year of record revenues and earnings is likely upon us. Therefore, I remain bullish on Intuit.
