H&R Block (HRB, Financial) has been trading at new all-time highs this week. We've been monitoring HRB to see if it would break its multi-month trading range. From mid-November to early May, it traded within a narrow $45-50 range. However, a strong Q3 earnings report on May 9 pushed the stock above this range, indicating potential for further gains.
- Intuit (INTU, Financial) and HRB share similarities. Both are known for tax preparation services but have expanded into other areas. Intuit is famous for Turbo Tax and QuickBooks, and has recently added Credit Karma and Mailchimp. Notably, INTU shut down its Mint offering, directing users to Credit Karma.
- H&R Block, primarily known for assisted tax prep services, also offers financial products and small business systems through Block Advisors and Wave. These services include bookkeeping, payroll, advisory, and payment processing. HRB also operates a mobile banking app, Spruce, and has a growing DIY tax prep segment.
- On May 9, HRB reported a significant EPS beat with modest revenue growth. Based on its Q3 performance and the end of tax season, HRB expects to finish the year near the high end of its outlook. The company highlighted strong DIY performance, virtual tax growth, and positive small business trends, along with progress for Spruce and Wave.
- HRB's paid DIY growth outpaced the overall DIY category. Paid volumes through April 30 grew 6%, with many filers switching from TurboTax. Customer satisfaction metrics, including ease of use and price per service, also improved. HRB focused on helping self-employed workers feel more confident in their tax outcomes, resulting in notable increases among these filers.
- HRB has been a long-time member of our Yield Leaders rankings, showcasing management's commitment to share buybacks. HRB posted a buyback yield of 10.1% and a 2.3% dividend yield, totaling a Shareholders Yield of 12.4%. In Q1-Q2, HRB repurchased $350 million, or 5.5% of shares outstanding, though it did not buy back shares in Q3.
Overall, we wanted to highlight H&R Block on this slow news day. We are impressed by its recent breakout above a multi-month trading range and the influx of DIY filers from Turbo Tax. The company's consistent share buybacks and strategic expansion into adjacent areas leveraging the trusted H&R Block name are commendable.
