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H&R Block (HRB) Down 3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for H&R Block (HRB - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is H&R Block due for a breakout? 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 catalysts.

H&R Block's Q1 Loss Flat Y/Y

H&R Block incurred first-quarter fiscal 2020 loss per share from continuing operations of 72 cents, lower than the Zacks Consensus Estimate of loss of 76 cents.

Loss was flat year over year as increase in pre-tax loss and lower shares outstanding offset increased tax benefit due to favorable discrete items. The company usually incurs loss in the first three quarters of fiscal year due to the seasonality of its tax business.

Revenues

Revenues of $150.4 million surpassed the consensus estimate by $1.8 million and increased 3.6% year over year. The improvement was driven by contribution from Wave Financial acquisition, improved tax return volumes in both U.S. Assisted and DIY, and increased international tax preparation fees.

Expenses

Total operating expenses were $345.5 million, up 5.6% year over year.  The increase was due to technology and Wave Financial related investments partially offset by lower depreciation and amortization expense.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $607.7 million compared with $1.6 billion at the end of the prior quarter. Long-term debt was $1.5 billion, flat with the prior quarter figure. The company used $483.8 million of cash in operating activities and capex was $15.2 million.

The company paid out dividends of $52.5 million in the quarter. A cash dividend of 26 cents per share is payable Oct 1, 2019 to shareholders of record on Sep 13, 2019. H&R Block repurchased and retired around 1.6 million shares at an aggregate price of $44.1 million.

Outlook

The company reaffirmed its fiscal 2020 outlook. It continues to expect total revenue growth of 1.5% to 3.5%. EBITDA margin is expected between 24% and 26%. Effective tax rate is anticipated to be 23-25%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, H&R Block has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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