H&R Block Says Fewer Americans Are Filing Taxes
Kansas based H&R Block Inc (NYSE: HRB) prepared 6.1 percent fewer returns in the early part of the tax season than it did last year. The number of returns filed declined from 11.28 million through February 28, 2015 to 10.59 million returns through February 28, 2016.
H&R Block attributed the across-the-board decline in office, online and software services to the continuing trend of later filings by taxpayers.
Wedbush Morgan's Gil Luria downgraded the rating for H&R Block from Outperform to Neutral, while reducing the price target from $46 to $32, after the company reported disappointing early season results due to greater-than-expected volume declines.
The analyst believes that H&R Block faces negligible macro risks and is capable of generating strong cash returns to its shareholders, but will find it difficult to generate positive volume growth.
H&R Block reported a 7 percent decline in its revenues to $475 million, which were lower than the consensus estimate of $502 million. The company's non-GAAP EPS of $90.34 also missed the consensus estimate of $90.24.
Independent preparers are taking share from the company in the assisted category. Luria wrote, "We believe independents are using refund advances and EITC promotions to take share away from HRB. While we expect the gap to narrow over the remainder of the season, we do not expect HRB to regain enough share to generate stable volume for the season."
The absence of stable volume growth is likely to restrict H&R Block's valuation.
Latest Ratings for HRB
|Nov 2016||BTIG Research||Downgrades||Neutral||Sell|
|Nov 2016||Morgan Stanley||Downgrades||Overweight||Equal-Weight|
|Aug 2016||BMO Capital||Maintains||Market Perform|
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