Zacks Investment Research downgraded shares of H&R Block Inc. (HRB) from NEUTRAL to UNDERPERFORM on April 02, 2014, with a target price of $28.00.
We downgrade our recommendation on H&R Block to Underperform from Neutral due to its dismal results in third-quarter fiscal 2014. The company had wider loss, top line plunged and expenses escalated. Both top and bottom line missed the Zacks Consensus Estimate. Its fluctuating debt-to-capital ratio and cash balance keeps us cautious. In addition, economic condition and exposure to international operations plays an important part on its operational results. Nonetheless, the company's decision to vend off H&R Block Bank will free up additional capital, which can be deployed in strategic opportunities. Moreover, the implementation of Affordable Care Act will open up revenue generating avenues for H&R Block. Its association with Go Health will help H&R Block foray into the health insurance brokerage business. It is also increasing its market share. Returning value to its shareholders will also help retain investor confidence in the stock.
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