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H&R Block Shares Stumble After 'Tough To Read' Q1 Report

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H & R Block Inc (NYSE: HRB) reported fiscal first-quarter results Tuesday, showing a 10 percent increase in revenues to $138 million and a wider loss of 62 cents per share. The results, however, were ahead of expectations.

The company indicated it typically reports a loss in the first quarter due to the seasonality of its tax business. The company also announced the appointment of Jeff Jones as president and CEO, effective October 9.

BMO Capital Markets said it wouldn't read much into these results, given that fiscal year first quarter is a seasonally light quarter. The firm has a Market Perform rating on shares and a $31 price target.

At last check, H&R Block shares were tumbling 6 percent to $27.35.

Analyst Jeffrey Silber noted that revenues grew at a faster pace than that of operating expenses. The analyst also said the management plans to provide more details on the company's 2018 outlook with the FQ2 results, with no Investor Day planned for the year. Management remains laser focused on its long-term client growth goal, the analyst added.

See Also: Intuit: Making Tax Accounting Sexy

Consequently, BMO Capital Markets believes promotional levels will continue this year. The firm said it's adjusting its earnings per share estimates slightly, raising the 2018 estimate to $2.04 but maintaining the 2019 estimate unchanged at $2.24.

The firm attributed the post-earnings weakness of the shares to the wider loss the company reported, although it did suggest the widening was due to a lower share count.

BMO Capital Markets pointed to the negative secular trends in the tax preparation industry, which is seeing a shift to do-it-yourself mode. That said, the firm thinks a revised strategy could spur a turnaround, although it believes it would take some time to get there.

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: BMO Capital Markets Jeffrey SilberAnalyst Color Reiteration Analyst Ratings

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