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Why Is H&R Block (HRB) Up 0.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for H&R Block (HRB - Free Report) . Shares have added about 0.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

H&R Block Beats on Q4 Estimates

H&R Block, Inc. reported impressive fourth-quarter fiscal 2023 results wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Shares have soared 9.7% since the earning release on Aug 15 owing to the better-than-expected results and impressive earnings per share (EPS) guidance for 2024.

Adjusted EPS is projected to be between $4.1 and $4.3, the midpoint ($4.2) of which is above the current Zacks Consensus Estimate of EPS of $4.1.

Fourth-quarter fiscal 2023 adjusted EPS of $2.05 (excluding 9 cents from non-recurring items) surpassed the consensus estimate by 8.5%. Earnings rose 43.4% on a year-over-year basis.

Revenues of $1.03 billion also exceeded the consensus estimate by 2% but decreased 1.7% year over year. The top line was positively impacted by a higher net average charge in the Assisted category.

Other Quarterly Numbers

Revenues from U.S. tax preparation and related services came in at $913.16 million, declining slightly from the year-ago figure. Revenues from Financial services came in at $16.5 million, 25.9% lower than the year-ago figure.

EBITDA for the reported quarter came at $422.82 million, 21.9% higher than the year-ago figure. This compares favorably with our expectation of an EBITDA of $408 million, up 17.6% year over year. EBITDA margin expanded 790 basis points (bps) year over year to 40.9%. This compares with our expectation of an EBITDA margin of 40.3%, up 730 bps year over year.

H&R Block exited the quarter with cash and cash equivalents of $986.98 million, compared with $909.1 million at the end of the prior quarter. Long-term debt and line of credit borrowings were $1.48 billion, in line with the previous quarter.

H&R Block generated $323.45 million of cash from operating activities while capex was $13 million.

2024 Outlook

H&R Block expects revenues in the range of $3.530-$3.585 billion. The midpoint of the guided range ($3.56 billion) lies below the current Zacks Consensus Estimate of $3.57 billion.

EBITDA is anticipated to be between $930 million and $965 million. The effective tax rate is expected to be around 23%.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -20.65% due to these changes.

VGM Scores

Currently, H&R Block has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. 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 A. 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 this revision 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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