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H&R Block (HRB) Incurs Wider Loss in Q1, Revenues Suffer
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H&R Block Inc. (HRB - Free Report) reported loss from continuing operations of 55 cents per share for fiscal first-quarter 2017, ended Jul 31, wider than the Zacks Consensus Estimate of a loss of 53 cents and the year-ago loss of 35 cents.
Owing to seasonality of its tax business, H&R Block typically reports loss in the fiscal first quarter. Results were affected by the divestiture of H&R Block Bank, so much so that cost reduction initiatives and a lower share count failed to arrest the deterioration in the bottom line.
Operational Performance
H&R Block reported revenues of $125 million in fiscal first quarter, down 9.4% year over year due to the adverse impact of the divestiture of H&R Block Bank. Lower return volumes in the U.S. assisted tax business as well as currency exchange rates in international business added to the woes. Revenues missed the Zacks Consensus Estimate by 4.2%.
Total operating expenses decreased 0.6% year over year to $309.9 million driven by effective cost management. However, higher occupancy and amortization expense on acquisitions of franchises in the prior year limited the improvement. Interest expense increased $12.9 million owing to the issuance of $1 billion in long-term debt in Sep 2015.
Loss before interest, tax, depreciation and amortization was $140 million, wider than $137 million incurred in the year-ago period.
Financial Position
H&R Block exited the fiscal first quarter with cash and cash equivalents of $428.9 million, down 68% year over year. The decline was primarily due to cash payments made for the transfer of deposit liabilities owing to the bank divestiture, changes in capital structure and share buyback.
Total outstanding long-term debt at the end of the quarter was $1.5 billion, higher than the year-ago level of $0.5 million due to the issuance of $650 million of 4.125% Senior Notes and $350 million of 5.250% Senior Notes.
Net cash used in operating activities was $475.7 million, which compared unfavorably with $378.2 million cash used in the prior quarter.
Dividend and Share Repurchase
The board of directors declared a quarterly dividend of 22 cents per share, payable on Oct 3, 2016 to shareholders of record as of Sep 14, 2016. The dividend will mark the 216th consecutive payout to shareholders since the company went public in 1962.
The company bought back 2 million shares in the reported quarter for $48.6 million and had 219.1 million shares remaining under the authorization as of Jul 3, 2016.
Intuit Inc. (INTU - Free Report) reported loss per share of 13 cents, narrower than the Zacks Consensus Estimate loss of 23 cents.
Zacks Rank
H&R Block presently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks from the consumer discretionary sector are Outerwall Inc. and Lincoln Educational Services Corporation (LINC - Free Report) , each sporting Zacks Rank #1 (Strong Buy).
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H&R Block (HRB) Incurs Wider Loss in Q1, Revenues Suffer
H&R Block Inc. (HRB - Free Report) reported loss from continuing operations of 55 cents per share for fiscal first-quarter 2017, ended Jul 31, wider than the Zacks Consensus Estimate of a loss of 53 cents and the year-ago loss of 35 cents.
Owing to seasonality of its tax business, H&R Block typically reports loss in the fiscal first quarter. Results were affected by the divestiture of H&R Block Bank, so much so that cost reduction initiatives and a lower share count failed to arrest the deterioration in the bottom line.
Operational Performance
H&R Block reported revenues of $125 million in fiscal first quarter, down 9.4% year over year due to the adverse impact of the divestiture of H&R Block Bank. Lower return volumes in the U.S. assisted tax business as well as currency exchange rates in international business added to the woes. Revenues missed the Zacks Consensus Estimate by 4.2%.
Total operating expenses decreased 0.6% year over year to $309.9 million driven by effective cost management. However, higher occupancy and amortization expense on acquisitions of franchises in the prior year limited the improvement. Interest expense increased $12.9 million owing to the issuance of $1 billion in long-term debt in Sep 2015.
Loss before interest, tax, depreciation and amortization was $140 million, wider than $137 million incurred in the year-ago period.
Financial Position
H&R Block exited the fiscal first quarter with cash and cash equivalents of $428.9 million, down 68% year over year. The decline was primarily due to cash payments made for the transfer of deposit liabilities owing to the bank divestiture, changes in capital structure and share buyback.
Total outstanding long-term debt at the end of the quarter was $1.5 billion, higher than the year-ago level of $0.5 million due to the issuance of $650 million of 4.125% Senior Notes and $350 million of 5.250% Senior Notes.
Net cash used in operating activities was $475.7 million, which compared unfavorably with $378.2 million cash used in the prior quarter.
Dividend and Share Repurchase
The board of directors declared a quarterly dividend of 22 cents per share, payable on Oct 3, 2016 to shareholders of record as of Sep 14, 2016. The dividend will mark the 216th consecutive payout to shareholders since the company went public in 1962.
The company bought back 2 million shares in the reported quarter for $48.6 million and had 219.1 million shares remaining under the authorization as of Jul 3, 2016.
BLOCK H & R Price, Consensus and EPS Surprise
BLOCK H & R Price, Consensus and EPS Surprise | BLOCK H & R Quote
Peer Performance
Intuit Inc. (INTU - Free Report) reported loss per share of 13 cents, narrower than the Zacks Consensus Estimate loss of 23 cents.
Zacks Rank
H&R Block presently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks from the consumer discretionary sector are Outerwall Inc. and Lincoln Educational Services Corporation (LINC - Free Report) , each sporting Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>