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H&R Block to Ride on Digital Strength Post Coronavirus Crisis

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H&R Block, Inc.’s (HRB - Free Report) performance has been good as the company served more clients than last year due to the extension of the tax season.

H&R Block recently reported its first-quarter fiscal 2021 results, with adjusted earnings per share of 55 cents beating the Zacks Consensus Estimate by 48.7%. The company had suffered a loss of 72 cents per share in the year-ago quarter. Revenues of $601 million surpassed the consensus estimate by 7.7% and increased more than 100% year over year.

Measures to Tackle Pandemic-led Issues Reaping Benefits

Currently, H&R Block’s financial performance is being driven by digital capabilities which the company increased quickly to cope with restrictions on working from physical premises. As a result, strength across Tax Pro Review, Tax Pro Go, and Approve Online features are keeping the company’s top and bottom lines in good shape.

Immediate drivers of H&R Block's performance post the coronavirus pandemic are likely to be the digital enablement of business, client addition and retention in both Assisted and DIY, greater usage of AI, and machine learning for product improvement as well as expansion in small businesses.

Tax Preparation Industry Expected to Remain Strong

The U.S. tax-preparation industry has been in good shape and we expect it to get healthier post the pandemic. We anticipate fall in unemployment and rise in disposable income to drive the industry’s growth, thereby positively impacting the demand environment for H&R Block’s services.

Strategic investments in price, technology and operational excellence are likely to help the company achieve long-term objectives of clients, revenues and earnings growth.

Zacks Rank and Other Key Picks

H&R Block currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader Zacks Business Services sector are BG Staffing (BGSF - Free Report) , CoreLogic (CLGX - Free Report) and Sykes Enterprises (SYKE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Long-term earnings (three to five years) growth rate for BG Staffing, CoreLogic and Sykes Enterprise is estimated at 20%, 12% and 8%, respectively.

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