H&R Block Surprises With Smaller-Than-Expected 3Q Loss; Shares Gain

H&R Block reported a lower-than-feared 3Q loss (ending Jan. 31, 2021). However, the tax-related service provider’s revenues fell short of analysts’ expectations. Shares were up 1.7% in Tuesday’s extended trading session.

H&R Block’s (HRB) 3Q loss of $1.17 per share widened from a loss of $0.59 per share in the year-ago period, reflecting lower revenues, the adverse impact of tax, and lower share count. However, it fared better than analysts’ expectations of a loss of $1.29 per share.

Revenues declined about 41% year-over-year to $308 million due to a “delayed start to the U.S. tax season and a later-than-usual opening of IRS [Internal Revenue Service] e-file,” the company said. However, the decline was partially offset by “an increase in small business payments processing and payroll volume at Wave, increased fees from Emerald Card transactions, and improved international results.”

As for fiscal 2021, the company has reiterated its revenue guidance in the range of $3.5-$3.6 billion. The company’s CFO, Tony Bowen, said, “We’re on target to deliver our financial outlook for the year.” He added, “This will drive strong free cash flow and significant return of capital to our shareholders through dividends and share repurchases.” (See H&R Block stock analysis on TipRanks)

On Feb. 24, Barrington analyst Alexander Paris maintained a Buy rating and a price target of $21 on the stock (6% upside potential). In a note to investors, the analyst said, “Because of the delayed start to the tax filing season (from January 27 last year to February 12 this year), some revenue will be pushed from Q3 (ending January 31) to Q4 (ending April 30).” As a result, he is raising his Q4 estimates.

Overall, the Street has a Moderate Buy consensus rating based on 1 Buy and 3 Holds. The average analyst price target of $19.50 implies downside potential of about 1.3% to current levels. Shares have gained around 6.5% over the past year.

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