Market Overview

Why H&R Block Is Spiking On Wednesday Morning

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  • Following its earnings report Tuesday night, H & R Block Inc (NYSE: HRB) was indicated more than 6 percent higher in pre-market trading.
  • Morgan Stanley and Wedbush analysts reiterated their Overweight and Outperform ratings on the stock, while raising their respective price targets.
  • The analysts applauded H&R Block for closing its bank sale and instituting a buyback of $3.5 billion in shares.

Thomas Allen at Morgan Stanley and Gil Luria at Wedbush both liked what they saw from H&R Block's fiscal first quarter. The analysts both reiterated their Overweight and Outperform ratings and upped their respective price targets by $2 in two separate notes.

Specifically, both analysts noted that the company was poised to enter a four-year share repurchase program of $3.5 billion, which Morgan Stanley's Allen pointed out was 38 percent of its current (as of Tuesday's close) market capitalization. Allen also said this number may be "conservative," suggesting that the company could ultimately buy back $5 billion.

Luria at Wedbush disagreed. He said that the current $3.5 billion "exceeds our estimates for magnitude and cadence of share buybacks." However, Luria said the firm expects H&R Block to raise the dividend, despite the fact that management did not comment on that portion of capital last night.

Moving forward, Wedbush forecasted topline growth of 3 to 4 percent and 6 to 8 percent of EBITDA growth in 2016. Morgan Stanley said that the firm should see 22 percent compound annual growth rate on EPS, even inside the "current uncertain economic environment."

As a result of forecasting more share repurchases, Morgan Stanley upped its price target to $42, from $40. Wedbush was more optimistic. Luria upped the firm's price target by $2 as well, but to $46. In the pre-market session, H&R Block was trading at $35.

Latest Ratings for HRB

DateFirmActionFromTo
Aug 2020Morgan StanleyMaintainsEqual-Weight
Jul 2020Northcoast ResearchUpgradesNeutralBuy
Jun 2020Morgan StanleyMaintainsEqual-Weight

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View the Latest Analyst Ratings

 

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Posted-In: Gil Luria H&R BlockAnalyst Color Long Ideas Price Target Reiteration Analyst Ratings Trading Ideas

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