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H&R Block (HRB) Q3 Loss Narrows Y/Y, Revenues Beat Estimates

Zacks Equity Research

H&R Block, Inc.’s HRB incurred third-quarter fiscal 2019 loss per share from continuing operations of 58 cents, higher than the Zacks Consensus Estimate of loss of 53 cents.

Loss narrowed year over year by 58 cents mainly due to the impact of corporate tax rate changes in the previous year. The company usually incurs loss in the first three quarters of fiscal year.

Shares of H&R Block have declined 18.1% in the past year, against the 1.9% increase of the Zacks S&P 500 composite.

Revenues

Revenues came in at $468 million compared with $488 million in the prior-year quarter. The year-over-year decrease can be attributed to the lower Assisted tax preparation revenues androyalties resulting from the delay in overall filings with the IRS. The top-line figure outpaced the Zacks Consensus Estimate of $461 million.

Expenses

Total operating expenses were up by $20.8 million year over year to $606.5 million owing to higher technology spend related to long-term initiatives and marketing, bad debt and supplies expense.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $203.2 million compared with $600.8 million at the end of the prior quarter. Long-term debt and line of credit borrowings were approximately $1.9 billion. The company used $719.8 million of cash in operating activities and spend $13.5 million on capex.

The company paid dividends of $51.4 million in the quarter. A cash dividend of 25 cents per share is payable Apr 1, 2019 to shareholders of record on Mar 18, 2018.

Fiscal 2019 Outlook

The company reaffirmed its fiscal 2019 outlook. H&R Block expects total revenues to be in the range of $3.05-$3.1 billion. The Zacks Consensus Estimate is pegged at $3.08 billion. EBITDA margin is expected to be between 24% and 26%.

Zacks Rank & Upcoming Releases

H&R Block currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Omnicom OMC, Robert Half RHI and Automatic Data Processing ADP. While Robert Half sports a Zacks Rank #1, Omnicom and Automatic Data Processing carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Omnicom, Robert Half and Automatic Data Processing is 6.9%, 8.4% and 12.8%, respectively.

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