Why Is H&R Block (HRB) Down 6.5% Since Last Earnings Report?

It has been about a month since the last earnings report for H&R Block (HRB). Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is H&R Block 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 Q4 Earnings Match Estimate

H&R Block, Inc.’s fourth-quarter fiscal 2020 earnings matched the Zacks Consensus Estimate while revenues surpassed the same.

Adjusted earnings per share came in at $3.01 down 30.3% year over year. Revenues of $1.81 billion surpassed the consensus estimate by 4.3% and declined 22.3% year over year.

The year-over-year decline in both top and bottom lines is due to delayed tax season in response to the coronavirus pandemic. The deadline for Federal filing has been extended to Jul 15. Moreover, as small businesses have been badly hit by the pandemic, volumes and revenues through the company’s Wave payments platform were low in the quarter.

Other Quarterly Numbers

Adjusted EBITDA from continuing operations came in at $819.62 million, down 31.5% year over year. Adjusted EBITDA margin of 45.3% from continuing operations declined from 51.3% in the year-ago quarter. Total operating expenses were $1.14 billion, down 3.3% year over year.

H&R Block exited the quarter with cash and cash equivalents balance of $2.66 billion compared with $192.34 million at the end of the prior quarter. Long-term debt and line of credit borrowings were $2.85 billion.

The company generated $1.58 billion of cash from operating activities and capex was $15.18 million. The company paid out dividends of $50 million in the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -53.56% due to these changes.

VGM Scores

At this time, H&R Block has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, H&R Block 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.

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