We have retained our Neutral recommendation on
H&R Block Inc
) as it reported a mixed fourth quarter and fiscal 2013 results.
H&R Block's fourth quarter and fiscal 2013 earnings per share
missed the Zacks Consensus Estimate. However, it improved year
over year on the back of successful cost containment measures.
The stock carries a Zacks Rank #3 (Hold).
H&R Block's adjusted income from continuing operations of
$2.54 per share for the fourth quarter of 2013 missed the Zacks
Consensus Estimate of $2.59 by 1.9%. It improved nearly 24% year
H&R Block's revenues stood at $2.2 billion, improving
approximately 10% year over year. Revenues lagged the Zacks
Consensus Estimate of $2.3 billion.
H&R Block has been trying to focus on its core tax business.
As such, it inked an agreement with Republic Bank and Trust
Company to divest the assets and transfer the liabilities of
H&R Block Bank.
This divesture will free up additional capital, which
otherwise would have been held back according to the Dodd-Frank
Act. In Dec 2011, the company had divested RSM McGladrey to
McGladrey & Pullen, LLP. RSM McGladrey offered accounting,
tax and consulting services to middle-market companies.
H&R Block remains focused on expense reduction initiatives
and enhancing its operational efficiency. H&R Block surpassed
its expectation to reduce costs by $85 to $100 million, thereby
augmenting earnings and margin expansion. The company is not
renewing its agreement with Wal-Mart in the United States, as the
performance and results from the channel failed to match its
expectations. These initiatives further reinforce the company's
efforts to improve operational efficiency.
In addition, the company has successfully captured market share
in the digital online category from Intuit for the third
H&R Block has always remained focused on returning increasing
value to its shareholders. In fiscal 2013, it spent $315 million
to buy back 21.3 million shares and is left with $875.5 million
under its authorization. H&R Block also boasts of a dividend
yield of 2.53%, better than the industry yield of 1.7%. It is
also higher than
Monro Muffler Brake Inc
) with yield of 1.0% and
Weight Watchers International, Inc
) with yield of 1.8%.
Both these companies are providers of miscellaneous consumer
services. With a strong financial position, we expect the company
to continue to enhance its shareholder value.
BLOCK H & R (HRB): Free Stock Analysis
INTUIT INC (INTU): Free Stock Analysis Report
MONRO MUFFLER (MNRO): Free Stock Analysis
WEIGHT WATCHERS (WTW): Free Stock Analysis
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On the tepid side, the performance of H&R Block is tied to
the overall health of the economy.
Furthermore, if H&R Block was successful in acquiring
2SS Holdings, Inc., a developer of Tax ACT digital tax
preparation solutions, the company would have gained an enlarged
clientele. This is turn would have subsequently intensified
competition in the digital market, which is presently dominated