H&R Block Inc. (HRB) has delivered seven positive earnings surprises in the last 10 quarters and boasts a dividend yield of 5.01%, sufficiently higher than the industry average of 1.83%.
Following the fiscal fourth quarter earnings release, shares of this tax service provider are moving upward. The company currently holds a Zacks #2 Rank (Buy).
Fiscal Fourth Quarter Results
Substantially all of H&R Block's revenues from income-tax return preparation and related services/products are received during January through April, as most of the clients file their tax returns during that period.
H&R Block reported its fourth quarter results on June 26, 2012. Earnings came in at $2.01 a share, which surpassed the Zacks Consensus Estimate by 2 cents, or a little more than 1%. However, this missed the year-ago quarter's earnings of $2.09 by almost 4%.
For fiscal 2012, H&R Block's adjusted income came in at $1.26 per share, exceeding the Zacks Consensus Estimate by 5 cents.
Fourth-quarter revenues declined 2.2% year over year to $2 billion. Revenues were almost in line with the Zacks Consensus Estimate. Lower financial product revenue more than offset the 1.2% rise in tax preparation and related revenue, eventually leading to the revenue decline.
Following the earnings release, analysts have raised their estimates. For fiscal 2013, the Zacks Consensus Estimate is currently $1.63, which is up nearly 6% in seven days as three of five estimates were revised upward. This outlook also suggests a year-over-year increase of 29%. For fiscal 2014, the Zacks Consensus Estimate of $1.84 has improved by a penny in that time and represents a year-over-year increase of 13%.
Dividend
Over the last 5 years, the board has authorized a dividend hike three times. The last dividend increase of 33% was announced in December 2011.
With an annual dividend payout of 80 cents, its dividend yield comes to 5.01%, much higher than its nearest peer Intuit Inc. (INTU) with a dividend yield of 1.01%, as well as the industry average of 1.83%.
Valuation Looks Attractive
Shares of H&R Block currently trade at a forward P/E of 9.9x, a 4.8% discount to the peer group average of 10.4x and its 10-year historical median of 11.8%. On a price-to-book basis, shares are currently trading at 5.5x, a 3.5% discount to the peer group average of 5.7x.
Given the long-term growth projection of 11%, the PEG ratio comes in at 0.9, marginally below the benchmark of 1 for a fairly priced stock.
Given a double-digit earnings growth prospect in the current years, the valuation presents a window of opportunity for investors seeking income and growth.
Summing Up
The performance of H&R Block is tied to the overall health of the economy. Nevertheless, the company has continuously bought back shares and paid a dividend, despite the current economic uncertainties. H&R Block is also increasing its share in the digital and assisted space as well as growing its international operations.
Founded in 1946 and headquartered in Kansas City, Missouri, H&R Block provides tax preparation services through retail tax offices in the U.S., Canada and Australia with approximately 2500 employees. The company's market capitalization is $4.39 billion.
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