Why Is H&R Block (HRB) Up 3.2% Since Last Earnings Report?

A month has gone by since the last earnings report for H&R Block (HRB). Shares have added about 3.2% in that time frame, underperforming the S&P 500.

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

H&R Block Q3 Loss Narrows Y/Y, Revenues Beat Estimates

H&R Block’s incurred third-quarter fiscal 2019 loss per share from continuing operations of 58 cents, higher than the Zacks Consensus Estimate of loss of 53 cents.

Loss narrowed year over year by 58 cents mainly due to the impact of corporate tax rate changes in the previous year. The company usually incurs loss in the first three quarters of fiscal year.

Revenues

Revenues came in at $468 million compared with $488 million in the prior-year quarter. The year-over-year decrease can be attributed to the lower Assisted tax preparation revenues and royalties resulting from the delay in overall filings with the IRS. The top-line figure outpaced the Zacks Consensus Estimate of $461 million.

Expenses

Total operating expenses were up by $20.8 million year over year to $606.5 million owing to higher technology spend related to long-term initiatives and marketing, bad debt and supplies expense.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $203.2 million compared with $600.8 million at the end of the prior quarter. Long-term debt and line of credit borrowings were approximately $1.9 billion. The company used $719.8 million of cash in operating activities and spend $13.5 million on capex.

The company paid dividends of $51.4 million in the quarter. A cash dividend of 25 cents per share is payable Apr 1, 2019 to shareholders of record on Mar 18, 2018.

Fiscal 2019 Outlook

The company reaffirmed its fiscal 2019 outlook. H&R Block expects total revenues to be in the range of $3.05-$3.1 billion. EBITDA margin is expected to be between 24% and 26%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, H&R Block has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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