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H&R Block (HRB) Incurs Narrower Loss in Q2, Revenues Up
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H&R Block Inc. (HRB - Free Report) reported second-quarter fiscal 2017 (ended Oct 31, 2016) adjusted loss from continuing operations of 67 cents per share, narrower than the Zacks Consensus Estimate of a loss of 68 cents. However, the reported earnings per share (EPS) were wider than loss of 51 cents reported in the prior-year quarter.
Owing to the seasonality of its tax business, H&R Block typically reports loss in the second quarter. Results were affected by the divestiture of H&R Block Bank, so much so that the cost reduction initiatives and a lower share count failed to arrest the deterioration in the bottom line.
H&R Block underperformed the Zacks categorized Consumer Services Miscellaneous industry, with its shares declining by 30% year to date, as against the industry’s 28.7% decline.
Operational Performance
H&R Block reported revenues of $131.3 million in the second quarter, up 2% year over year, primarily due to the company’s positive impact of currency exchange rates in international business in addition to its improved product revenue in the U.S. Revenues beat the Zacks Consensus Estimate by 4.2%.
Total operating expenses decreased 6.3% year over year to $339.4 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 $8.4 million to $22.6 million owing to the issuance of $1 billion in long-term debt in Sep 2015.
Loss before interest, tax, depreciation and amortization was $160.7 million, narrower than $168.8 million incurred in the year-ago period.
Financial Position
H&R Block exited the second quarter with cash and cash equivalents of $232.5 million, down 35.5% 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 approximately $2 billion, higher than the year-ago level of $1.5 billion due to line of credit borrowings of $475 million.
For the six months ended Oct 31, 2016, net cash used for operating activities was $725.8 million, which compared unfavorably with $602.7 million cash used in the year-ago comparable period.
Dividend and Share Repurchase
The board of directors declared a quarterly dividend of 22 cents per share, payable on Jan 3, 2017 to shareholders on record as of Dec 5, 2016. The company has paid dividend consecutively to its shareholders since the company went public in 1962.
The company bought back approximately 7.6 million shares in the reported quarter for $168.4 million and had 211.5 million shares remaining under the authorization as of Oct 31, 2016.
The company completed its share repurchases under a $3.5 billion share repurchase program approved on Aug 2015, which will run through Jun 2019. Per this program, H&R Block repurchased approximately 66 million shares, or 23.9% of outstanding shares, worth approximately $2.2 billion.
Peer Performance
Intuit Inc. (INTU - Free Report) reported loss per share of 11 cents, narrower than the Zacks Consensus Estimate of loss of 17 cents.
SP Plus has a long-term earnings growth expectation of 11.5% and has an average forward PE of 23.7x.
Weight Watchers has a long-term earnings growth expectation of 15% and has an average forward PE of 11.4x.
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H&R Block (HRB) Incurs Narrower Loss in Q2, Revenues Up
H&R Block Inc. (HRB - Free Report) reported second-quarter fiscal 2017 (ended Oct 31, 2016) adjusted loss from continuing operations of 67 cents per share, narrower than the Zacks Consensus Estimate of a loss of 68 cents. However, the reported earnings per share (EPS) were wider than loss of 51 cents reported in the prior-year quarter.
Owing to the seasonality of its tax business, H&R Block typically reports loss in the second quarter. Results were affected by the divestiture of H&R Block Bank, so much so that the cost reduction initiatives and a lower share count failed to arrest the deterioration in the bottom line.
H&R Block underperformed the Zacks categorized Consumer Services Miscellaneous industry, with its shares declining by 30% year to date, as against the industry’s 28.7% decline.
Operational Performance
H&R Block reported revenues of $131.3 million in the second quarter, up 2% year over year, primarily due to the company’s positive impact of currency exchange rates in international business in addition to its improved product revenue in the U.S. Revenues beat the Zacks Consensus Estimate by 4.2%.
Total operating expenses decreased 6.3% year over year to $339.4 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 $8.4 million to $22.6 million owing to the issuance of $1 billion in long-term debt in Sep 2015.
Loss before interest, tax, depreciation and amortization was $160.7 million, narrower than $168.8 million incurred in the year-ago period.
Financial Position
H&R Block exited the second quarter with cash and cash equivalents of $232.5 million, down 35.5% 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 approximately $2 billion, higher than the year-ago level of $1.5 billion due to line of credit borrowings of $475 million.
For the six months ended Oct 31, 2016, net cash used for operating activities was $725.8 million, which compared unfavorably with $602.7 million cash used in the year-ago comparable period.
Dividend and Share Repurchase
The board of directors declared a quarterly dividend of 22 cents per share, payable on Jan 3, 2017 to shareholders on record as of Dec 5, 2016. The company has paid dividend consecutively to its shareholders since the company went public in 1962.
The company bought back approximately 7.6 million shares in the reported quarter for $168.4 million and had 211.5 million shares remaining under the authorization as of Oct 31, 2016.
The company completed its share repurchases under a $3.5 billion share repurchase program approved on Aug 2015, which will run through Jun 2019. Per this program, H&R Block repurchased approximately 66 million shares, or 23.9% of outstanding shares, worth approximately $2.2 billion.
Peer Performance
Intuit Inc. (INTU - Free Report) reported loss per share of 11 cents, narrower than the Zacks Consensus Estimate of loss of 17 cents.
Zacks Rank & Stocks to Consider
H&R Block presently carries a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the Consumer Services Miscellaneous industry include SP Plus Corporation (SP - Free Report) and Weight Watchers International, Inc. (WTW - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SP Plus has a long-term earnings growth expectation of 11.5% and has an average forward PE of 23.7x.
Weight Watchers has a long-term earnings growth expectation of 15% and has an average forward PE of 11.4x.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time? Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>