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H&R Block (HRB): Will Earnings Disappoint in Fiscal Q4?

H&R Block Inc.HRB is set to report fiscal fourth-quarter 2016 results on Jun 9, after the market closes . Last quarter, the company posted a negative earnings surprise of 30.8%. Let's see how things are shaping up for this announcement.

Factors Influencing Quarterly Results

Owing to the divestiture of H&R Block Bank to BofI Federal Bank, a subsidiary of BofI Holding, Inc. BOFI , the company is estimated to incur a charge of 2-3 cents per share in fiscal 2016. Also, the tax preparer continues to face competition from Intuit Inc. INTU .

For fiscal 2016, the company expects operating revenues to be on par with the fiscal 2015 level. However, including forex and the impact of the H&R Block Bank divestiture, revenues are expected to decrease year over year. H&R Block estimates adjusted EBITDA margin of 28%.

H&R Block announced that tax returns, prepared via tax software products, decreased 2.6% owing to the pricing strategies of its peers. However, better monetization favorably impacted software revenues.

We note that being a tax preparer, H&R Block generates most of its revenues from January through April each year. Thus each fiscal fourth quarter reflects the true picture of the company's operational performance.

Nonetheless, H&R Block is set to benefit from its focus on the core tax business. Also, the company has likely witnessed higher volumes of filing benefit due to the implementation of the Affordable Care Act. Share buyback, which leads to a lower share count, should also give a boost to the bottom line.

With respect to the surprise trend, H&R Block lagged expectations in two of the last three quarters, resulting in an average negative surprise of 6.74%.

BLOCK H & R Price and EPS Surprise

BLOCK H & R Price and EPS Surprise | BLOCK H & R Quote

Earnings Whispers

Our proven model does not conclusively show that H&R Block is likely to beat estimates this quarter. This is because 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%. This is because both the Most Accurate estimate and Zacks Consensus Estimate are pegged at $3.17.

Zacks Rank : H&R Block carries a Zacks Rank #4 (Hold). Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Equity LifeStyle Properties, Inc. ELS , with an Earnings ESP of +1.37% and a Zacks Rank #2, is expected to beat estimates during its next earnings release, which is scheduled for Jul 18 , 2016.

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BOFI HLDG INC (BOFI): Free Stock Analysis Report

INTUIT INC (INTU): Free Stock Analysis Report

EQUITY LIFESTYL (ELS): Free Stock Analysis Report

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

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


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

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