H&R Block Upgraded to “Buy” at Compass Point (HRB)

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Tax prep specialist H&R Block, Inc. ( HRB ) on Tuesday caught a big upgrade from analysts at Compass Point Research.

The firm said it boosted its rating on HRB from "Neutral" to "Buy" while lifting its price target from $17 to $20. That new target suggests a 19% upside to the stock's Monday $16.76.

Compass Point analyst Mike Turner commented, "As the FY12 tax season concludes and we approach a resolution regarding the deployment of HRB's substantial excess capital, we view the risk/reward as skewed to the upside. From a fundamental perspective, we expect the FY12 tax season will show slight revenue growth. Given the prior three years of tax revenue declines, we believe this fundamental turn in the business combined with the streamlining of the company (through the sale of RSM) positions the firm for a balance sheet repositioning that should involve more agressive share repurchases. Further, we believe news such as a potential bankruptcy at ResCap, has increased investor comfort that the parent should be insulated from mortgage putback risk. Thus, as our analysis suggests share repurchases have the potential to exceed 20% of shares outstanding, we believe any potential stock weakness will be viewed as a buying opportunity."

H&R Block shares rose 13 cents, or +0.8%, in premarket trading Tuesday.

The Bottom Line
Shares of H&R Block ( HRB ) have a 4.77% dividend yield, based on last night's closing stock price of $16.76. The stock has technical support in the $15 price area. If the shares can firm up, we see overhead resistance around the $18 price level.

H&R Block, Inc. ( HRB ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.1 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



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.

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