H&R Block Reports Mixed Results - Analyst Blog

By
A A A

H&R Block Inc .'s ( HRB ) income from continuing operations of $2.01 per share in the fourth quarter of fiscal 2012, ending April 30, modestly surpassed the Zacks Consensus Estimate by 2 cents. This missed the year-ago quarter's earnings of $2.09 by almost 4%. Net income from continuing operations for the quarter was $591.7 million, comparing unfavorably with $642.8 million reported in the fourth quarter of fiscal 2011.

Including income from discontinued operations of $5.6 million or 2 cents a share, the company reported a net income of $586.1 million or $1.99 per share in the quarter under review, compared with $658.6 million or $2.14 a share earned in the fourth quarter of fiscal 2011.

For fiscal 2012, H&R Block's adjusted income came in at $1.06 per share, falling short of the Zacks Consensus Estimate by 15 cents.

Including after-tax charges of $30.8 million or 10 cents per share, largely related to a previously announced strategic realignment and litigation expenses and net loss from discontinued operations of $80 million or 27 cents a share, the company reported net income of $265.9 million or 89 cents per share in fiscal 2012. This compares unfavorably with $406.1 million or $1.31 per share in fiscal 2011.

Operational Performance

Revenue in the quarter under review was $2 billion, down 2.2% year over year. Reported revenue was almost in line with the Zacks Consensus Estimate.

Revenues for fiscal 2012 grossed $2.9 billion, down 1.7% year over year, though almost in line with the Zacks Consensus Estimate.

Total expense in the quarter totaled $1.02 billion, higher by 1.6% over the prior-year quarter. Total expense for the year inched down 0.04% over fiscal 2011.

The company reported an operating income of $981 million in the fourth quarter, a decline of 5.8% year over year.  Operating income for fiscal 2012 declined 8.1% year over year.

Segment Performance

Tax Services revenue was $1.99 billion in the fourth quarter of fiscal 2012, reflecting a decline of 2.1%.

Fiscal revenue was $2.9 billion, down 1.7% year over year. Lower financial product revenues more than offset tax preparation and related revenues that increased 1.2%, leading to the overall decline.

Pre-tax income for the segment was $1.01 billion, declining 7% year over year.

Pre-tax income for the fiscal declined 8.3% year over year to $704 million. The decline was due to lower revenues from financial products, higher marketing expense, and a decline in gains from the sale of company-owned offices. However, lower credit losses were a partial offset.

Corporate and Eliminations posted revenue of $6.4 million, down 22% from the prior-year quarter. Fiscal revenue also declined 3.7% over the previous year.

Segment's pre-tax loss in the quarter was $34 million, narrowed from the loss of $48 million in the year-ago quarter. Pre-tax loss of the fiscal also improved to $127.9 million from $139.8 million in fiscal 2011.

Financial Position

H&R Block ended fiscal 2012 with cash and cash equivalents of $1.99 billion, nearly 15% lower from $1.73 billion at the end of fiscal 2011. Total outstanding long-term debt at the reported quarter end was $0.41 billion, a 60% drop from lower than $1.04 billion at the end of fiscal 2011.

Net cash provided by operating activities in fiscal 2012 was $362 million, down 29% from $512 million in fiscal 2011.

Share repurchase and Dividend

In fiscal 2012, H&R Block spent $200.0 million to buyback 14.6 million shares at a cost of $13.74 per share. During fiscal fourth quarter, the company bought back 1.5 million shares.

Till date, in the first quarter of fiscal 2013, H&R Block spent $315.0 million to buyback 21.3 million shares at a cost of $14.82 per share.

On July 2, the company will pay a dividend of 20 cents per share to the shareholders of record as of June 11, 2012.

Peer Comparison

Intuit Inc. ( INTU ), which competes with H&R Block, reported third quarter fiscal 2012 adjusted earnings $2.43 per share, beating the Zacks Consensus Estimate of $2.39.


Revenues of $1.95 billion in the third quarter were up 5.2% from $1.85 billion in the prior-year quarter. Reported revenue was in line with the lower end of management's guidance range of $1.95 billion to $1.99 billion and slightly below the Zacks Consensus Estimate of $1.96 billion.

Our Take

H&R Block's leading position in the tax preparer market, its strategic initiatives to grow its business by gaining and retaining customers augur well for long-term growth. The company's effort to return more value to its shareholders will also help retain investor confidence in the stock. H&R Block is also increasing its share in the digital and assisted space.

H&R Block scores strongly with the credit rating agencies. Standard & Poors' affirmed the 'BBB' issuer credit rating based on its solid liquidity.

We retain our Neutral recommendation on H&R Block. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the shares over the near term.
 


 
BLOCK H & R (HRB): Free Stock Analysis Report
 
INTUIT INC (INTU): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HRB , INTU

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

89,865,296
  • $16.21 ▲ 0.81%
75,109,464
  • $2.72 ▲ 3.03%
66,341,418
  • $97.67 ▲ 1.46%
62,511,232
  • $93 ▲ 1.32%
61,561,006
  • $75.95 ▲ 4.57%
57,374,027
  • $3.21 ▲ 69.84%
49,928,586
  • $24.82 ▲ 2.35%
39,880,670
  • $43.63 ▲ 2.08%
As of 10/17/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com