Intuit Inc. (INTU, Hold) issued its fiscal Q209 results yesterday after the bell. Although year-over-year comparisons were negative, both for revenue and EPS, the company beat both our and consensus expectations by a comfortable margin. Q3 and full-year guidance was also softened considerably, particularly at the bottom line, reflecting the management’s concern of the softening economic environment. Nevertheless, the stock traded up sharply after the market close yesterday and is up nearly 12% so far today.

The tax preparation software maker’s EPS beat came mainly from tight cost control, although operating income as a percentage of revenues fell nearly 5.2% on a year-over-year basis. Part of this decline was attributed to a deference of approx. $70 million of revenue from its top-selling TurboTax tax-preparation software to the 3rd quarter because of a change in the way it priced the product. Without the change in revenue timing, non-GAAP operating income would have been approximately $230 million, compared to $172 million on a non-GAAP basis.

Q2 revenue from TurboTax fell 25 percent to $187 million as Intuit took the accounting change. Revenue from the Turbo Tax line peaks in the fiscal 2nd and 3rd quarters, ahead of the deadline for filing U.S. taxes in mid-April. The company also cut its full-year QuickBooks revenue forecast to a range of $580 million to $620 million, or a drop of 7 percent to flat y/y growth. Its previous guidance was sales of $650 million to $675 million for FY2009.

It is expected that Intuit will attempt to make the most of the current economic environment to acquire new customers in order to monetize them down the road. However, we believe that the increased advertising and promotions utilized in that effort may reduce margins for the year. Advertising spend as a percent of revenue has already climbed from 2.2% in FY05 to 3.9% in FY:08.

Given management’s previous comments regarding a 50% increase in marketing spend on Quickbooks, we believe this trend is likely to continue. Although the evidence is anecdotal, we also believe the promotional effort this fiscal year is higher than usual.

We continue our coverage of INTU with a Hold rating.

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“INTU” Free Stock Analysis: Buy? Sell? Hold?
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