On Jul 16, we issued an updated research report on
H&R Block Inc.
This Zacks Rank #2 (Buy) tax preparer posted solid results with
fourth-quarter and fiscal 2014 earnings and revenues outpacing the
Zacks Consensus Estimate and higher than the year-ago quarter
figures. Increased revenues generated by Tax Services aided the
H&R Block, in an effort to focus on core business, decided to
divest its H&R Block Bank to BofI Federal Bank, a subsidiary of
BofI Holding, Inc.
). Consequently, H&R Block will incur a one-time cost of about
2-3 cents per share in the fiscal 2014. It also estimates dilution
of about 7-9 cents per share on an annualized basis, stemming from
the service agreement with BofI Federal Bank. The bank transaction
will result in about $200 to $250 million of immediate excess
capital. The Zacks Consensus Estimate for fiscal 2015 is currently
pegged at $1.95 per share.
Moreover, the implementation of Affordable Care Act will open up
revenue generating avenues for H&R Block. Notably, H&R
Block's association with Go Health helped it to foray into the
health insurance brokerage business.
H&R Block also enhanced its online digital tax software
focusing on improving monetization and conversion. This category
also continued to benefit from the migration of pen and paper
Furthermore, the company remains committed to increase
shareholders' value. Its dividend yield of 2.4% exceeds the
industry average of 2.1%. This, in turn, retains existing
investors' confidence and helps in attracting new investors. It
also has $857.5 million remaining under its share buyback
However, performance of H&R Block is dependant on the overall
health of the economy. Also, with international exposure, its
operations are subject to changes in trade regulations, profit
repatriation regulations, exchange rate fluctuations and economic
condition of the countries abroad.
Other Stock to Consider
Investors interested in personal services industry may consider
better ranked stocks like
DeVry Education Group Inc
). Both stocks carry a Zacks Rank #1 (Strong Buy).
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