H&R Block Inc . HRB is set to report fiscal third-quarter 2016 results on Mar 3, after the market closes. Last quarter, the company posted a negative earnings surprise of 4.08%. 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 .
We note that being a tax preparer company, H&R Block generates most of its revenues from January through April each year. As a result, the company incurs losses during the first three fiscal quarters of the year.
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. Enhancements in its online digital tax software, which focuses on improving monetization and conversion, may also have driven results in the to-be-reported quarter.
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 -15.39%. This is because the Most Accurate estimate stands at a loss of 30 cents while Zacks Consensus Estimate is pegged lower at a loss of 26 cents.
Zacks Rank : H&R Block carries a Zacks Rank #3 (Hold). Though this increases the predictive power of ESP, the company's negative ESP makes a surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
A Stock to Consider
Alexandria Real Estate Equities, Inc. ARE , with an Earnings ESP of +3.22% and a Zacks Rank #3, is expected to beat estimates during its next earnings release, which is scheduled for Apr 25, 2016.