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H&R Block (HRB) Down 4.1% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for H&R Block, Inc.HRB . Shares have lost about 4.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

H&R Block Incurs Narrower Loss in Q3, Revenues Down

H&R Block reported third-quarter fiscal 2017 (ended Jan 31, 2017) adjusted loss from continuing operations of $0.49 per share, narrower than the Zacks Consensus Estimate of a loss of $0.71. However, it was wider than a loss of $0.34 reported in the prior-year quarter.

Owing to the seasonality of its tax business, H&R Block typically reports loss in the third quarter. Results were affected by the decline in revenues during the quarter.

Operational Performance

H&R Block reported revenues of $451.9 million in the fiscal third quarter, down 4.8% year over year. The fall was primarily due to decline in client volumes in the Assisted and DIY tax preparation businesses resulting from the delay in the overall tax season, and pricing impact of the early season promotions which include Free Federal 1040EZ and H&R Block More Zero. Revenues marginally beat Zacks Consensus Estimate of $451 million.

Total operating expenses declined 3% year over year to $576.7 million driven by effective cost management.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $221.2 million compared with $189.5 million as of Jan 31, 2016. Total outstanding long-term debt was approximately $2.6 billion, in line with the year-ago level.

For the year ended Jan 31, 2017, net cash used for operating activities was $1.4 billion, which was the same as the year ago period.

Share Repurchase and Dividend

The company bought back approximately 4.4 million shares in the reported quarter for $100 million, bringing the total share repurchases for fiscal 2017 to approximately 14 million shares for $317 million.

The company completed share repurchases under a $3.5 billion share repurchase program as of Aug 2015 which will run through Jun 2019. Per this program, the company repurchased approximately 70 million shares, or 25.5% of shares outstanding at the beginning of the program for an aggregate purchase price of approximately $2.3 billion.

The board of directors declared a quarterly dividend of $0.22 per share, payable on Apr 3 to shareholders on record as of Mar 14. The company has paid quarterly dividends consecutively to its shareholders since the company went public in 1962.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been three upward revisions for the current quarter compared to two downward.

H&R Block, Inc. Price and Consensus

H&R Block, Inc. Price and Consensus | H&R Block, Inc. Quote

VGM Scores

At this time, H&R Block, Inc.'s stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our styles scores, the stock is suitable solely for value investors.

Outlook

Etimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.

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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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