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Will Heavy Investments Dent H&R Block (HRB) in Q2 Earnings?

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H&R Block, Inc. (HRB - Free Report) is scheduled to report second-quarter fiscal 2019 results on Dec 5, after the bell.

The company has an impressive earnings surprise history, surpassing the Zacks Consensus Estimate in all of the trailing four quarters with an average positive earnings surprise of 6.9%. Shares have gained 7.7% year to date, against the industry’s decline of 2.8%.

Let’s see how things are shaping up for the announcement.

Investments to Affect Quarterly Results

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $138 million, indicating year-over-year decline of 2.1%. The consensus mark for the bottom line is pegged at a loss of 92 cents, which indicates year-over-year rise of 29.6%. Ongoing strategic investments in price, technology and operations will continue to weigh on revenues and increase costs. This will negatively impact the company’s results in the to-be-reported quarter.

Seasonality to Have a Greater Impact

Seasonality might have a higher negative impact on the upcoming quarterly results compared with the year-ago quarter. The company generates majority of revenues and earns profit in the fourth quarter of the fiscal year, as most of its clients file their tax returns from January through April. Revenues stay significantly down and the company incurs loss in the first three quarters of the fiscal.

Our Model Does Not Suggest a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

H&R Block has an Earnings ESP of 0.00% and a Zacks Rank #3, a combination that lowers chances of an earnings beat.

Stocks to Consider

Here are some stocks that you may want to consider as our model shows that these have the right combination of elements to deliver a positive earnings surprise:

Automatic Data Processing, Inc (ADP - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fiserv, Inc (FISV - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank #3.

Waste Management, Inc (WM - Free Report) has an Earnings ESP of +0.70% and a Zacks Rank #3.

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