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Why Is H&R Block (HRB) Up 8.2% Since the Last Earnings Report?

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A month has gone by since the last earnings report for H&R Block, Inc. (HRB - Free Report) . Shares have added about 8.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

H&R Block Beats Q4 Earnings & Revenue Estimates

H&R Block reported fourth-quarter fiscal 2017 (ended Apr 30, 2017) adjusted earnings from continuing operations of $3.76 per share, which beat the Zacks Consensus Estimate of $3.51. Increase in earnings was attributed to a rise in revenues during the quarter.

GAAP earnings from continuing operations came in at $3.79 per share compared with $3.15 in the year-ago quarter.

For full-year fiscal 2017, the company reported adjusted earnings from continuing operations of $1.96 per share compared with $1.53 in the prior year. This improvement was largely due to the company’s cost reduction efforts, which also enabled investment in key client-driving initiatives during the year.

Operational Performance

H&R Block reported revenues of $2,327.9 million in the fiscal fourth quarter compared with $2,297.5 million in the prior-year quarter. Revenues beat the Zacks Consensus Estimate of $2,316 million.

For fiscal 2017, the company reported revenues of $3,036.3 million, relatively flat with the prior year. This was due to improvement in the company's Assisted net average charge, partially offset by a decline in return volume.

Total operating expenses declined 3.7% year over year to $1,094.4 million driven by effective cost management.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $1,011.3 million compared with $896.8 million as of Apr 30, 2016. Total outstanding long-term debt was approximately $1,493 million.

For the fiscal year, net cash used for operating activities was $550.1 million, which was 3.3% higher than the year-ago period.

Share Repurchase and Dividend

In fiscal 2017, the company bought back approximately 14 million shares worth $317 million. As of Apr 30, 2017, 207.2 million shares were outstanding.

The company completed share repurchases under a $3.5 billion share repurchase program as of Aug 2015 which will run through Jun 2019. The company repurchased approximately 70.4 million shares, or 25.5% of shares outstanding at the beginning of the program for an aggregate purchase price of approximately $2.3 billion.

The board of directors declared a quarterly dividend of $0.24 per share, payable on Jul 3 to shareholders on record as of Jun 23. The company has been paying quarterly dividends to its shareholders since the company went public in 1962.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

VGM Scores

At this time, H&R Block's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile 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.

Zacks' style scores indicate that the stock is suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #1 (Strong Buy). We are looking for an above average return from the stock in the next few months




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