Zacks Investment Research downgraded shares of H&R Block Inc. (HRB) from OUTPERFORM to NEUTRAL on October 15, 2014, with a target price of $30.00.
We are downgrading H&R Block to Neutral from Outperform given its further delay in bank divestment due to regulatory issues. The company's bottom line in fiscal first quarter bettered the Zacks Consensus Estimate loss and was in line the year-ago quarter loss due to improved revenues. The top line fared well on both counts owing to the extension of the Canadian tax season. In addition, the decision to vend 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. The company's association with Go Health helps it to foray into the health insurance brokerage business. However, higher expenses, higher leverage and fluctuating cash position keep us cautious.
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