H&R Block Inc. HRB is set to report fiscal second-quarter 2016 results on Dec 7 after the market closes. Last quarter, the company posted a positive 14.63% surprise. Let’s see how things are shaping up for this announcement.
Factors Influencing This Past Quarter Results
H&R Block is set to benefit from its intensified focus on the core tax business. As most of the clients file their tax returns from January through April of each year, most of H&R Block’s revenues from income tax return preparation, and related services and products are received during this period. As a result, the tax preparer generally incurs loss in the first three fiscal quarters and enjoys robust earnings in the fourth quarter of each fiscal.
The tax preparer is also positioned to benefit from the Affordable Care Act implementation that was made effective on Jan 1, 2014.
The company also made several enhancements in its online digital tax software focusing on improving monetization and conversion.
However, H&R Block continues to face competition from Intuit Inc. INTU. The company is estimated to incur 2–3 cents per share in fiscal 2016 due to its divesture of H&R Block Bank to BofI Federal Bank, a subsidiary of BofI Holding, Inc. BOFI.
Earnings Whispers?
Our proven model does not conclusively show that H&R Block is likely to beat estimates this quarter. This is because 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 0.00% Earnings ESP. This is because both the Most Accurate estimate and Zacks Consensus Estimate stand at a loss of 49 cents per share.
Zacks Rank: H&R Block carries a Zacks Rank #3 (Hold). Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
SP Plus Corporation SP with Earnings ESP of +3.33% and a Zacks Rank #1 is likely to beat estimates in its next earnings release expected on Mar 2, 2016.
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