H&R Block (HRB: 14.84 +0.15 +1.02%) shares have been beaten up in the last six months, losing nearly 40% since January. The stock looks attractively-priced at current levels and could deliver decent upside from here.
The stock struggled in its busiest season of the year: tax time. It has also gone through a management shake-up that has created some doubt among the investment community. Those factors have weighed heavily on its shares.
Nevertheless, the stock has beaten EPS estimates in the last three quarters; it has a forward P/E in the single digits, and it pays out a juicy dividend.
Growth and Income
The company is expected to grow its earnings per share 9.0% in fiscal 2011, 14.0% in fiscal 2012, and 11.0% over the long term. The stock also offers investors a dividend yield of 4.1%.
This Zacks #2 Rank stock trades at 9.1x fiscal 2011 consensus EPS estimates and 8.0x fiscal 2012 consensus EPS estimates.
Business
H&R Block, Inc., through its subsidiaries, provides tax, retail banking, accounting, and business consulting services and products.
Recent News
On July 8, H&R Block’s president and CEO, Russ Smyth, unexpectedly resigned. The stock dropped about 8% on the news. Former interim CEO, Alan Bennett, was named as Smyth’s replacement. This followed former legal counsel, Brian Woram, resigning in June, and former CFO, Becky Schulman, resigning in April.
On June 24, H&R Block reported financial results for the fourth quarter of fiscal year 2010. The company announced total revenues of $3.9 billion, down 5.1% from the year-ago quarter. The company blamed the decline in revenue on record levels of unemployment that led to fewer returns being filed by its core retail tax client base.
The company earned $2.11 per share, beating the Zacks Consensus Estimate by 7 cents, or 3.4%. In the last three quarters, the company has beaten the Zacks Consensus Estimate by an average of 7.6%.
Balance Sheet
At April 30, the company had cash of $1.8 billion and total outstanding debt of $1.1 billion. Shareholder equity at fiscal year-end was $1.4 billion, essentially flat to the prior year as the company returned substantially all earnings to shareholders in the form of share repurchases and dividends.
During fiscal year 2010, the company repurchased 12.8 million shares at a cost of $250 million, including repurchases of 6.0 million shares in the fourth quarter. In addition, the company paid out a quarterly cash dividend of 15 cents per share on July 1.
Estimates
In the last month, the Zacks Consensus Estimate for fiscal 2011 is up 2 cents, or 1.3%, to $1.59 and the Zacks Consensus Estimate for fiscal 2012 is up 2 cents, or 1.1%, to $1.81.
The Chart
HRB shares peaked in January 2010 around $23, and its has endured a brutal slide in the first half of 2010. The stock is down 37% from mid-January to mid-July. The stock is still looking for a bottom.
| Analysts' Targets | |
| Oppenheimer & Co. Inc. | $22 |
| Outperform | |
| Tuesday, April 27, 2010 | |
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