Will H&R Block (HRB) Miss Q1 Earnings on Idle Tax Season? - Analyst Blog


H&R Block Inc . ( HRB ) is set to report fiscal first quarter 2015 results on Sep 3. Last quarter, it posted a 5.33% surprise. Let's see how things are shaping up for this announcement.

Factors Influencing the Past Quarter

Though the company will divest its H&R Block Bank to BofI Federal Bank - subsidiary of BofI Holding, Inc. ( BOFI ) - to intensify its focus on the core tax business, it will witness dilution of about 7-9 cents per share on an annualized basis stemming from the service agreement with BofI Federal Bank. Nonetheless, the bank transaction will result in about $200 million to $250 million of immediate excess capital.

Effective Jan 1, 2014, as per the Affordable Care Act (ACA), all Americans should either have health insurance in 2014 or pay a penalty through this year's tax return. As a result, the company expects to gain slightly from ACA implementation.

The company has consistently returned value to shareholders. Its dividend yield of 2.38% betters the industry average of 2.08% and another player, Monro Muffler Brake Inc.'s ( MNRO ) yield of 1.01%.  Nonetheless, it faces intense competition from Intuit Inc. ( INTU ).

As most of the clients file their tax returns from January through April of each year, most of H&R Block's revenues from income tax return preparation as well as related services and products are received during this period. As a result, the Tax Services segment generally operates at a loss through the first eight months of a fiscal year. The first quarter results of H&R Block are likely to be impacted by this tax seasonality.   

Earnings Whispers

Our proven model does not conclusively show that H&R Block is likely to beat earnings this quarter because it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP :  H&R Block has an Earnings ESP of 0.00%. That is because the Most Accurate estimate and Zacks Consensus Estimate stand at a loss of 41 cents.

Zacks Rank : H&R Block has a Zacks Rank #3 (Hold) that increases the predictive power of ESP. A combination of Zacks Rank #3 and a 0.00% Earnings ESP makes surprise prediction difficult.

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INTUIT INC (INTU): Free Stock Analysis Report

BLOCK H & R (HRB): Free Stock Analysis Report

MONRO MUFFLER (MNRO): Free Stock Analysis Report

BOFI HLDG INC (BOFI): Free Stock Analysis Report

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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 , Earnings , Stocks

Referenced Stocks: INTU , HRB , MNRO , BOFI



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