The leading tax prep firm bumped up its dividend and is launching a $1.5 billion stock buyback plan.
Tax prep firm H&R Block (NYSE:HRB) was a top gainer on Friday, as its stock price was about 14% after strong earnings and a hefty dividend raise.
The company saw revenue jump 3% in its fiscal fourth quarter to $1.06 billion, beating estimates of $1.03 billion. Net income fell 14% to $258 million, or $1.82 per share. When adjusted to exclude one-time items, earnings were $1.89 per share, still down year-over-year, but better than the estimates of $1.74 per share.
The earnings beat, along with a 17% dividend raise to 37.5 cents per share, helped lift H&R Block stock on Friday. The stock was up 14%, trading at around $65 per share. It is up roughly 35% year-to-date.
As H&R Block just finished its fiscal fourth quarter, it also released its fiscal year 2024 results, which showed solid gains across the board.
Revenue for the full year rose 4% to $3.61 billion, primarily due to a higher net average charge and greater online paid returns at a higher net average charge.
Net income for the full year increased 6.4% to $598 million, or $4.14 per share, while its cash position rose 7% to $1.05 billion.
“In fiscal 2024 we made strides across our different products and services that provide value to our clients and help enable their financial confidence,” Jeff Jones H&R Block’s president and CEO, said. “We continue to make progress, gain new insight, and translate this client success into value for shareholders, and are well positioned to build on this momentum in fiscal 2025 and beyond.”
The improving financials allowed H&R Block to raise its quarterly dividend a whopping 17%, to 37.5 cents per share, up from 32 cents per share the previous quarter. This is the eighth straight year of dividend increases. The dividend has a yield of 2.2%.
The company also authorized the repurchase of $1.5 billion in company shares in the new fiscal year, on top of the $350 million in shares repurchased in fiscal 2024. Share repurchases typically boost the share price of a stock, because it reduces the amount of available shares, thus increasing demand and driving up the stock price.
Outlook for fiscal 2025
H&R Block established guidance for fiscal 2025, calling for revenue to be in the range of $3.69 billion to $3.75 billion — an increase of 2% to 4%. That would be on pace with 2024 growth on the high end.
EBITDA is targeted at $975 million to $1.02 billion for the year, which would be 1% to 6% higher than fiscal 2024.
Further, adjusted earnings per share are expected to be in the range of $5.15 to $5.35 per share, up 17% to 21% over adjusted EPS in fiscal 2024.
Earnings for the year will get a 50 cent per share boost because of a lower effective tax rate due to the closure of various matters under examination.
Is H&R Block stock a buy?
While H&R Block got a $10 price target upgrade from Barrington after earnings were released, Wall Street doesn’t see much more growth from H&R Block, as it has an average price target of $60 per share, which would be down from its current $65.
I’m slightly more bullish than that as the company is still fairly cheap, with a forward P/E of 12, and has solid projections for revenue and earnings in fiscal 2025. It also has a good dividend, strong financials, and should get a boost from the buyback plan.
I’d tend to think the stock has a little more upside, perhaps in line with Barrington’s $70 per share price target. Its not going to shoot the lights out, but it might be a solid play for some investors.
