With a 2.3% dividend yield, H&R Block (HRB) looks like a pretty good deal or so it would seem. Last night’s quarterly report included some unfortunate details that are causing HRB stock to trend lower this morning. Can the tax expert bounce back?
Company Overview
H&R Block is one of the country’s leading tax preparation companies. With roots that go back to 1955, H&R Block has grown into a global business that prepares nearly 25 million tax returns worldwide and brings in over $3 billion in sales. H&R Block currently operates about 11,000 retail tax offices in the U.S. and another 1,700 across Canada, Australia and Brazil.
Earnings and Dividend Buzz
For the third quarter, HRB sank to a net loss of $116.2 million or $0.42 per share. Since H&R Block reported a net loss of $115.2 million in the third quarter of 2013, not much appears to have improved. A $7 million loss from discontinued operations accounted for the bulk of the slide. Excluding special items, H&R Block reported an adjusted loss of $0.40 per share, in line with estimates.
Meanwhile, the company’s revenues climbed 5% year over year to $133.6 million, topping analysts’ estimates of $130.2 million in revenue.
Still, this earnings report didn’t give HRB much reason to celebrate, even with the ex-dividend date coming up. HRB goes ex-dividend on Sept. 5, and shareholders of record will receive $0.20 per share on Oct. 1. At current prices, H&R Block has a 2.4% annual dividend yield.
Current Ratings
One glance at HRB’s fundamental ratings reveals that H&R Block needs to firm up its own balance sheet before earning a “buy” recommendation. Of the eight fundamental metrics Portfolio Grader graded it on, HRB earns a “D” on its track record of earnings surprises, and it earns a “C” on operating margin growth as well as earning surprises.
While the company currently earns “Bs” on sales growth and earnings growth, I expect those grades to slip once we’ve plugged in the latest quarterly results. HRB earns a “B” for its overall Fundamental Grade (for now).
Meanwhile, institutional investors have been shying away from H&R Block. So, HRB stock barely squeaks by with a “C” for its quantitative grade, which indicates a mediocre risk-to-return ratio for the conservative stock.
Bottom Line
As of this posting, September 4, 2014, HRB is a “C”-rated “hold.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
