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H&R Block (HRB) Up 25.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for H&R Block (HRB). Shares have added about 25.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is H&R Block due for a pullback? 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 (HRB) Q3 Earnings Surpasses Estimates

H&R Block reported better-than-expected third-quarter fiscal 2022 results.

Adjusted earnings per share (excluding 6 cents from non-recurring items) of $4.11 beat the Zacks Consensus Estimate by 17.1% and surged more than 400% year over year. Revenues of $2.1 billion surpassed the consensus estimate by 6.6% but dropped 11.4% year over year.

Other Quarterly Numbers

Pretax income surged $33 million to $862 million. Total operating expenses of $1.2 billion were up 4% year over year. The uptick was due to greater field compensation and marketing expenses.

H&R Block exited the quarter with cash and cash equivalents balance of $1041.7 million compared with $336.3 million at the end of the prior quarter. Long-term debt was $1.5 billion compared with $1.8 billion at the end of the previous quarter.

H&R Block generated $1286.7 million of cash in operating activities while capex was $13.3 million. HRB paid out dividends of $46.5 million in the quarter.

2022 Outlook

HRB revised its fiscal 2022 outlook on a strong tax-season performance.

H&R Block expects revenues in the range of $3.375-$3.425 billion (prior view: from $3.25 billion to $3.35 billion) for 2022, the midpoint ($3.4 billion) being above the current Zacks Consensus Estimate of $3.32 billion.

EBITDA is expected between $850 million and $875 million (prior view: $765 million and $815 million). The tax rate is now expected to be lower in the range of 14-16%.

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 nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

H&R Block has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

H&R Block belongs to the Zacks Consumer Services - Miscellaneous industry. Another stock from the same industry, Rent-A-Center (RCII), has gained 4.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Rent-A-Center reported revenues of $1.16 billion in the last reported quarter, representing a year-over-year change of +11.9%. EPS of $0.74 for the same period compares with $1.32 a year ago.

Rent-A-Center is expected to post earnings of $1.02 per share for the current quarter, representing a year-over-year change of -37.4%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Rent-A-Center has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.


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