H&R Block Inc. (HRB) is set to report fiscal second-quarter 2015 results on Dec 8. Last quarter, it posted a 2.44% surprise. Let’s see how things are shaping up for this announcement.
Factors Influencing the Past Quarter
The tax preparer is set to benefit from the Affordable Care Act (ACA) implementation effective Jan 1, 2014. As per ACA, all Americans should either have health insurance in 2014 or pay a penalty through this year’s tax return.
However, as most of the clients file their tax returns from January through April each year, most of H&R Block’s revenues from income tax return preparation as well as related services and products are received during this period. As a result, the Tax Services segment generally operates at a loss through the first eight months of a fiscal year. The second quarter results of H&R Block are likely to be impacted by this tax seasonality. It also faces intense competition from Intuit Inc. (INTU).
H&R Block is estimated to record earnings of 7–9 cents per share on an annualized basis thanks to the service agreement with BofI Federal Bank (BOFI).
The company has consistently returned value to shareholders, testifying to its solid operational performance. Its dividend yield of 2.34% betters the industry average of 2.01% and another player, Monro Muffler Brake Inc.'s (MNRO) yield of 0.94%.
Earnings Whispers
Our proven model does not conclusively show that H&R Block is likely to beat earnings this quarter because it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: H&R Block has an Earnings ESP of 0.00%. That is because the Most Accurate estimate and Zacks Consensus Estimate stand at a loss of 42 cents.
Zacks Rank: H&R Block has a Zacks Rank #3 (Hold) that increases the predictive power of ESP. However, 0.00% Earnings ESP makes surprise prediction difficult.
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