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Forzberg in Igor,

Investment idea - Intuit

Intuit, the number one US provider of tax preparation software for consumers and finance/management solutions for small business, issued decent financials for the first quarter of the 2014 fiscal year started July, 1. The company’s revenue/EPS of $622 mn/($0.06) exceeded consensus forecast of $602.9 mn/($0.09), with all business segments showing healthy growth. In particular, in spite of seasonably light period, consumer tax revenue was up 11% y-o-y. It was also a strong quarter for small business as both the Small Business Management Solutions and Small Business Financial Solutions segments grew nicely (15% y-o-y and 9% y-o-y, respectively). Through F1Q the company bought back around $1.4 bn in shares of their $2 bn accelerated repurchase plan that is expected to be complete in December. Dividends were $0.19/share (+12.9% y-o-y) with dividend yield of around 1%.

Our view on the company’s perspective remains optimistic taking into account recent developments in the US economy. In 3Q13 the US GDP growth rate accelerated to 3.6%, and positive trend is expected to continue in the next year. Small business usually bounces back faster when the economy continues to improve, which should positively affect Intuit’s small business customer base. Improving conditions in the economy will further increase consumer confidence and thus boost demand for financial services from households. We note that the company regularly updates its software products to make them more simple and attractive for users. Besides Intuit’s management is working hard on transferring small business customers to a cloud-based online solution which should help margin growth. A potential opportunity for the company’s growth lies in the expansion of small business solutions internationally.

We believe Intuit shares could be an interesting stake on the further recovery of the US economy, with medium term target price of $80.