H&R Block Inc.
) has delivered seven positive earnings surprises in the last 10
quarters and boasts a dividend yield of 5.01%, sufficiently higher
than the industry average of 1.83%.
Following the fiscal fourth quarter earnings release, shares of
this tax service provider are moving upward. The company currently
holds a Zacks #2 Rank (Buy).
Fiscal Fourth Quarter Results
Substantially all of H&R Block's revenues from income-tax
return preparation and related services/products are received
during January through April, as most of the clients file their tax
returns during that period.
H&R Block reported its fourth quarter results on June 26, 2012.
Earnings came in at $2.01 a share, which surpassed the Zacks
Consensus Estimate by 2 cents, or a little more than 1%. However,
this missed the year-ago quarter's earnings of $2.09 by almost 4%.
For fiscal 2012, H&R Block's adjusted income came in at $1.26
per share, exceeding the Zacks Consensus Estimate by 5 cents.
Fourth-quarter revenues declined 2.2% year over year to $2 billion.
Revenues were almost in line with the Zacks Consensus Estimate.
Lower financial product revenue more than offset the 1.2% rise in
tax preparation and related revenue, eventually leading to the
Following the earnings release, analysts have raised their
estimates. For fiscal 2013, the Zacks Consensus Estimate is
currently $1.63, which is up nearly 6% in seven days as three of
five estimates were revised upward. This outlook also suggests a
year-over-year increase of 29%. For fiscal 2014, the Zacks
Consensus Estimate of $1.84 has improved by a penny in that time
and represents a year-over-year increase of 13%.
Over the last 5 years, the board has authorized a dividend hike
three times. The last dividend increase of 33% was announced in
With an annual dividend payout of 80 cents, its dividend yield
comes to 5.01%, much higher than its nearest peer Intuit Inc. (
) with a dividend yield of 1.01%, as well as the industry average
Valuation Looks Attractive
Shares of H&R Block currently trade at a forward P/E of 9.9x, a
4.8% discount to the peer group average of 10.4x and its 10-year
historical median of 11.8%. On a price-to-book basis, shares are
currently trading at 5.5x, a 3.5% discount to the peer group
average of 5.7x.
Given the long-term growth projection of 11%, the PEG ratio comes
in at 0.9, marginally below the benchmark of 1 for a fairly priced
Given a double-digit earnings growth prospect in the current years,
the valuation presents a window of opportunity for investors
seeking income and growth.
The performance of H&R Block is tied to the overall health of
the economy. Nevertheless, the company has continuously bought back
shares and paid a dividend, despite the current economic
uncertainties. H&R Block is also increasing its share in the
digital and assisted space as well as growing its international
Founded in 1946 and headquartered in Kansas City, Missouri, H&R
Block provides tax preparation services through retail tax offices
in the U.S., Canada and Australia with approximately 2500
employees. The company's market capitalization is $4.39 billion.
BLOCK H & R (HRB): Free Stock Analysis
To read this article on Zacks.com click here.