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H&R Block (HRB) Up 14.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for H&R Block (HRB - Free Report) . Shares have added about 14.2% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

H&R Block's Q3 Loss Narrower than Expected, Revenues Beat

H&R Block reported third-quarter fiscal 2021 adjusted loss per share of $1.17 that came below the Zacks Consensus Estimate of a loss of $1.25. The company had suffered a loss of 59 cents per share in the year-ago quarter.

Revenues of $308 million surpassed the consensus estimate by 35% but decreased 41% year over year. The decline was due to the late start to the U.S. tax season and a later-than-usual opening of IRS e-file, partially offset by increased fees from Emerald Card transactions, rise in small business payments processing and payroll volume at Wave, and improved international results.

Other Quarterly Numbers

 Service revenues of $245 million decreased 42% year over year. Royalty, product and other revenues came in at $64 million, declining 36% year over year.        

Pretax loss came in at $284 million compared with a loss of $177 million in the year-ago quarter. Total operating expenses were $572 million, down 15% year over year.

H&R Block exited the quarter with cash and cash equivalents balance of $280 million compared with $209 million at the end of the prior quarter. Long-term debt and line-of-credit borrowings were $2.4 billion compared with $1.6 billion at the end of the previous quarter.

H&R Block used $646 million of cash in operating activities and capex was $21 million. The company paid out dividends of $48 million in the quarter.

2021 Outlook

H&R Block expects revenues in the range of $3.5 billion to $3.6 billion in 2021. EBITDA is expected to be between $950 million and $1 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, H&R Block has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. 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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