Wedbush Reiterated Outperform On H&R Block Following Meetings With Management

In a research note issued Friday, Wedbush analyst Gil Luria reiterated an Outperform rating on H&R Block (HRB) with a $37 price target, which represents a potential upside of 13% from where the stock is currently trading.

Luria wrote, “Meetings with CEO and CFO indicate the company is approaching the successful completion of its multi-year turnaround and focusing on top-line growth. CEO Cobb believes that after three years of dispositions and restructuring, the company is where he intended it to be at the beginning of the transformation. We believe the 4% revenue growth in FY14 after years of decline confirm the success of this transformation. We see this level of growth as sustainable, with 2-3 point of pricing in assisted tax and faster growth in digital, international and financial products. At this level of growth, we believe operating leverage could lead to margin expansion as well”.

The analyst continued, “Management continues to see the implementation of the Affordable Care Act as the greatest incremental opportunity for the company, with upside from new filers coming in as result of their health care exchange sign up, and new monetization avenues. We expect the contribution from the Affordable Care Act will come mostly from enhancing the pricing leverage as new forms are introduced next year (see our note quantifying impact). We do not yet see a significant short-term opportunity from health insurance sales, though that business line still represent longer-term upside”.

According to, which measures analysts and bloggers success rate based on how their calls perform, analyst Gil Luria currently has a one-year average return of 9.4% and a 68% success rate. Luria has a 10.9% average profit when recommending HRB, and is ranked #640 out of 3213 analysts.

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