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Why Is H&R Block (HRB) Down 10.7% Since Its Last Earnings Report?

It has been about a month since the last earnings report for H&R Block, Inc.HRB . Shares have lost about 10.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is HRB 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 drivers.

H&R Block Incurs Narrower-Than-Expected Loss in Q3

H&R Block incurred third-quarter fiscal 2018 (ended Jan 31, 2018) loss from continuing operations of $1.16 per share, narrower than the Zacks Consensus Estimate of loss of $1.33. Better-than-expected results were attributable to a rise in revenues during the quarter.

Consolidated loss for the quarter came in at $1.18 per share compared with loss of 50 cents in the year-ago quarter owing to changes in effective tax rate resulting from the recently enacted federal corporate tax legislation.

Operational Performance

H&R Block reported revenues of $488.4 million in the fiscal third quarter compared with $451.9 million in the prior-year quarter. The year-over-year increase in revenues was attributable to higher return volumes in both Assisted and DIY tax preparation businesses. Revenues beat the Zacks Consensus Estimate of $457 million.

As of Feb 28, 2018, total U.S. return volume increased 3.4% with returns from Assisted and DIY businesses increasing 0.7% and 8.2%, respectively. While the Assisted business benefited from the success of early-season promotions including the company's Refund Advance no-interest loan and Free Federal 1040EZ offer, DIY business gained from continued product improvements, enhanced partnerships and the H&R Block More Zero promotion.

Total operating expenses increased 2% year over year to $585.7 million due to higher compensation costs.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $187.4 million compared with $221.2 million in the year-ago period. Total outstanding long-term debt was approximately $2,284.2 million compared with $2,592.6 million in the prior-year quarter.

For the first nine months of fiscal 2018, net cash used for operating activities was $1,357.7 million compared with $1,409.9 million in the year-ago quarter.

Dividend

The board of directors declared a quarterly dividend of 24 cents per share payable on Apr 2 to shareholders on record as of Mar 13. The company has been paying uninterrupted quarterly dividends to its shareholders since it went public in 1962.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared with one lower.

H&R Block, Inc. Price and Consensus

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

VGM Scores

At this time, HRB has a poor Growth Score of F. However, its Momentum is doing a lot better with a B. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, HRB has a Zacks Rank #3 (Hold). We expect an in-line 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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