On Jun 15, 2015, we issued an updated research report on H&R Block Inc.HRB .
H&R Block's earnings per share in fiscal 2015 outperformed the Zacks Consensus Estimate but fell 3.3% year over year. Revenues exhibited improvement for three straight years on the successful implementation of a pricing strategy and a better return mix at its retail locations. An increase in digital do-it-yourself (DIY) volume and monetization along with the impact of franchise acquisitions also aided the upside.
Total tax returns prepared by and through H&R Block declined in fiscal 2015. The tax season witnessed the first year of Accountable Care Act or ACA implementation.
The industry saw concerns pertaining to fraud increasing in the latest tax season and H&R Block was quick to leverage from this trend. The Tax Identity Shield by the company was launched to shield its clients from fraudulent activity. H&R Block's initiatives are expected to increase its total marketplace enrollment by over 65% to about 12 million people in in the near term.
Moreover, H&R Block has been trying to focus on its core tax business. As such, it decided to divest its H&R Block Bank, and hence announced the signing of a deal between H&R Block Bank and BofI Federal Bank, a subsidiary of BofI Holding, Inc. BOFI . The company estimates about $1 billion in excess capital upon closure of the bank deal.
H&R Block continues to pay back its investors via share buyback and dividend. In fact, its dividend yield betters the sector average.
Nonetheless, the company faces competition from Intuit Inc. INTU . A decline in cash inflows also resulted in lower cash and cash equivalents year over year.
Again, H&R Block has expanded its operations to Canada, Australia, India and Brazil. Its operations are therefore subject to changes in trade regulations, profit repatriation regulations, foreign currency exchange rate fluctuations and the economic condition of the country.
A mixed performance resulted in a decline in the Zacks Consensus Estimate of this Zacks Rank #3 (Hold) consumer service provider over the last 7 days. It decreased by a cent to $2.00 for 2016 (as 1 of 6 estimates moved down) and by 10.2% to $2.39 for 2017 (1 of 4 estimates moved down). However, these estimates translate into a year-over-year increase of 14% and 19.7% for 2016 and 2017, respectively.
Stock to Consider
A better-ranked consumer service provider is Outerwall Inc. OUTR , which sports a Zacks Rank #1 (Strong Buy).
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