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Why Is H&R Block (HRB) Down 4.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for H&R Block (HRB). Shares have lost about 4.4% 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 catalysts.

H&R Block Posts Narrower-Than-Expected Loss in Q1

H&R Block reported first-quarter fiscal 2022 loss (excluding 7 cents from non-recurring items) of 78 cents per share, narrower than the Zacks Consensus Estimate of a loss of $1.05. Operating revenues of $192.6 million surpassed the Zacks Consensus Estimate by 14.8%.  

U.S. assisted tax preparation, U.S. royalties, U.S. DIY tax preparation and international revenues came in at $33.6 million, $7.4 million, $4.1 million and $58.3 million, respectively.

Emerald Card, Peace of Mind Extended Service Plan and Wave revenues were $28.3 million, $24.8 million and $19.1 million, respectively.

Pretax loss came in at $197.3 million compared with a loss of $32.9 million in the year-ago quarter. Total operating expenses were $367 million, down 12% year over year (driven by lower tax pro compensation on lighter return volumes as the quarter took place after the 2021 filing deadline).

H&R Block exited the quarter with cash and cash equivalents of $891.7 million compared with $934.3 million at the end of the prior quarter. Long-term debt was $1.98 billion compared with $1.5 billion (long-term debt and line of credit borrowings) at the end of the previous quarter.

H&R Block used $3.1 billion of cash from operating activities and capex was $15.6 million. The company repurchased $166 million of shares and paid out dividends worth $48.9 million in the quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, H&R Block has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, H&R Block has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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