Here’s Why H&R Block Stock Is Up 14% Right Now
The leader in tax preparation increases dividend and launches $1.5 billion share repurchase plan.
Tax preparation company H&R Block (NYSE:HRB) was one of the biggest gainers on Friday, with shares up about 14% after strong earnings and a massive dividend increase.
The company reported revenue of $1.06 billion, up 3% in its fiscal fourth quarter, beating estimates of $1.03 billion. Net income fell 14% to $258 million, or $1.82 per share. Excluding one-time items, net income was $1.89 per share, still down from the year-ago period but better than estimates of $1.74 per share.
H&R Block shares rose on Friday after earnings improvement and a 17% dividend hike to 37.5 cents a share. The stock rose 14% to trade at about $65 a share. It has risen about 35% since the beginning of the year.
H&R Block just wrapped up its fiscal fourth quarter and reported fiscal 2024 results, showing solid earnings across the board.
Annual revenue increased 4% to $3.61 billion, driven primarily by higher net average costs and increased online paid returns driven by higher net average costs.
Annual net income rose 6.4% to $598 million, or $4.14 per share, while cash on hand rose 7% to $1.05 billion.
“In fiscal 2024, we made progress across a range of products and services that deliver value to our customers and help them achieve financial certainty,” said Jeff Jones, H&R Block’s president and CEO. “We continue to make progress, gain new insights and translate this customer success into value for our shareholders, and we are well-positioned to build on this momentum in fiscal 2025 and beyond.”
Thanks to its improved financials, H&R Block raised its quarterly dividend by a whopping 17% to 37.5 cents per share, up from 32 cents per share in the previous quarter. This is the eighth consecutive year of dividend increases. The dividend yield is 2.2%.
The company also authorized the repurchase of $1.5 billion of company stock in the new fiscal year, in addition to the $350 million it purchased in fiscal 2024. Stock repurchases typically boost the stock price, as they reduce the number of shares available, increasing demand and driving up the stock price.
Outlook for fiscal year 2025
H&R Block has set guidance for fiscal 2025, calling for revenues in the range of $3.69 billion to $3.75 billion, representing a 2% to 4% increase, matching the strong growth seen in 2024.
This year’s EBITDA target is $975 million to $1.02 billion, up 1% to 6% from fiscal 2024.
Additionally, adjusted earnings per share are expected to be in the range of $5.15 to $5.35 per share, up 17% to 21% from adjusted earnings per share in fiscal 2024.
The resolution of various investigative matters is expected to lower the effective tax rate, resulting in an increase of 50 cents per share in annual earnings.
Should You Buy H&R Block Stock?
After Barrington raised its price target for H&R Block to $10 after the earnings report, Wall Street is unlikely to see much more growth from H&R Block, as the average price target has now been lowered to $60 from $65.
I am slightly more bullish on the company as it is still fairly cheap, has a forward P/E of 12, and has a solid outlook for revenue and earnings for fiscal 2025. It also has a good dividend, a strong balance sheet, and will benefit from its share buyback plan.
I think the stock has a bit more upside potential, probably matching Barrington’s $70 price target. It won’t be a huge upside, but it could be a solid investment for some investors.
