H&R Block (HRB) Down 2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for H&R Block (HRB). Shares have lost about 2% 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 the most recent earnings report in order to get a better handle on the important drivers.

H&R Block’sincurred first-quarter fiscal 2019 loss per share from continuing operations of 72 cents, narrower than the Zacks Consensus Estimate of loss of 79 cents.

Loss increased year over year by 10 cents mainly due to lower effective tax rate, which negatively impacts quarters with a seasonal net loss. The company usually incurs loss in the first three quarters of fiscal year due to seasonality of its business.

Revenues

Revenues came in at $145 million compared with $138 million in the prior-year quarter. The year-over-year increase can be primarily attributed to the timing of revenues from the Peace of Mind Extended Service Plan and Tax Identity Shield, partially offset by lower revenues from Refund Transfer. The top-line figure outpaced the Zacks Consensus Estimate of $136 million.

Expenses

Total operating expenses were up by $4.3 million year over year to $327.3 million owing to higher compensation and consulting expenses, partially offset by lower depreciation and amortization and bad debt expense.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $979.1 million compared with $1,544.9 million at the end of the prior quarter. Total outstanding long-term debt was approximately $1.5 million, relatively flat with the previous quarter. The company used $375.6 million of cash in operating activities and spend $12.1 million on capex.

The company purchased and retired 4.2 million shares at an aggregate price of $97 million, and paid dividends of $52.1 million in the quarter. A cash dividend of 25 cents per share is payable Oct 1, 2018 to shareholders of record on Sep 12, 2018.

Fiscal 2019 Outlook

For fiscal 2019, H&R Block expects total revenues to be in the range of $3.05-$3.1 billion, the mid-point of which is in line with the Zacks Consensus Estimate of $3.08 billion. EBITDA margin is expected to be between 24% and 26%. Effective tax rate is anticipated to be in the 23-25% band.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, 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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