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H&R Block (HRB) Incurs Narrower-Than-Expected Loss in Q3

Zacks

H&R Block Inc. HRB incurred third-quarter fiscal 2018 (ended Jan 31, 2018) loss from continuing operations of $1.16 per share, narrower than the Zacks Consensus Estimate of loss of $1.33. Better-than-expected results were attributable to a rise in revenues during the quarter.

Consolidated loss for the quarter came in at $1.18 per share compared with loss of 50 cents in the year-ago quarter owing to changes in effective tax rate resulting from the recently enacted federal corporate tax legislation.

Operational Performance

H&R Block reported revenues of $488.4 million in the fiscal third quarter compared with $451.9 million in the prior-year quarter. The year-over-year increase in revenues was attributable to higher return volumes in both Assisted and DIY tax preparation businesses. Revenues beat the Zacks Consensus Estimate of $457 million.

H&R Block, Inc. Price, Consensus and EPS Surprise

H&R Block, Inc. Price, Consensus and EPS Surprise | H&R Block, Inc. Quote


As of Feb 28, 2018, total U.S. return volume increased 3.4% with returns from Assisted and DIY businesses increasing 0.7% and 8.2%, respectively. While the Assisted business benefited from the success of early-season promotions including the company's Refund Advance no-interest loan and Free Federal 1040EZ offer, DIY business gained from continued product improvements, enhanced partnerships and the H&R Block More Zero promotion.

Total operating expenses increased 2% year over year to $585.7 million due to higher compensation costs.

Financial Position

H&R Block exited the quarter with cash and cash equivalents of $187.4 million compared with $221.2 million in the year-ago period. Total outstanding long-term debt was approximately $2,284.2 million compared with $2,592.6 million in the prior-year quarter.

For the first nine months of fiscal 2018, net cash used for operating activities was $1,357.7 million compared with $1,409.9 million in the year-ago quarter.

Dividend

The board of directors declared a quarterly dividend of 24 cents per share payable on Apr 2 to shareholders on record as of Mar 13. The company has been paying uninterrupted quarterly dividends to its shareholders since it went public in 1962.

Zacks Rank & Other Stocks to Consider

H&R Block expects to continue improving its financial performance in the remainder of the fiscal year with increase in client trajectory. Also, the company reiterated its earlier guidance. H&R Block carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include Monro, Inc. MNRO, SP Plus Corporation SP and Weight Watchers International, Inc. WTW, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Monro has a long-term earnings growth expectation of 13.7%. It topped earnings estimates twice in the trailing four quarters with an average positive surprise of 0.9%.

SP Plus has a long-term earnings growth expectation of 10%. It topped earnings estimates thrice in the trailing four quarters with an average positive surprise of 23.2%.

Weight Watchers has a long-term earnings growth expectation of 15%. It topped earnings estimates in each of the trailing four quarters with an average positive surprise of 42.2%.

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