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

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

Will the recent positive trend continue leading up to its next earnings release, or is H&R Block headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

H&R Block (HRB) third-quarter earnings beat estimates

H&R Block announced better-than-expected results for the third quarter of fiscal 2022.

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

Other quarterly numbers

Pre-tax income increased by $33 million to $862 million. Total operating expenses of $1.2 billion increased 4% year-over-year. The increase was due to higher field salaries and marketing expenses.

H&R Block ended the quarter with a cash and cash equivalent balance of $1,041.7 million, compared to $336.3 million at the end of the prior quarter. Long-term debt was $1.5 billion, up from $1.8 billion at the end of the previous quarter.

H&R Block generated $1,286.7 million in cash from operations, while capital expenditures amounted to $13.3 million. HRB paid a dividend of $46.5 million this quarter.

Outlook for 2022

HRB revised its fiscal 2022 forecasts due to strong performance during the tax season.

H&R Block expects 2022 revenue in the range of $3.375 billion to $3.425 billion (earlier guidance: $3.25 billion to $3.35 billion), with the midpoint ($3.4 billion) higher than current estimates Zacks Consensus Estimate of $3.32 billion.

EBITDA is expected to range from USD 850 million to USD 875 million (preliminary forecast: USD 765 million and USD 815 million). Currently, the tax rate is expected to be lower and will be 14-16%.

How have estimates changed since then?

It turns out, revision estimates have flattened over the past month.

VGM results

Currently, H&R Block has a nice B Growth Score, a rating with the same Momentum Score. Following exactly the same trajectory, the stock was rated B for Value, putting it in the top 40% for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

H&R Block carries a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

H&R Block is part of the Zacks Consumer Services – Miscellaneous industry. Another stock in the same industry, Rent-A-Center (RCII), has gained 4.7% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2022.

Rent-A-Center reported revenue of $1.16 billion in its most recently reported quarter, representing a year-over-year change of +11.9%. EPS of $0.74 for the same period compared to $1.32 a year ago.

For the current quarter, Rent-A-Center is expected to report earnings of $1.02 per share, which would represent a year-over-year change of -37.4%. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

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 Rating of A.

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