Analyst Prefers To Let The Dust Settle From H&R Block's Q4 Beat

After a big fourth-quarter earnings beat on Tuesday, H & R Block Inc (NYSE: HRB) shares spiked over 9 percent.

The surprise beat, driven by savings on the cost side, revenues and lower-than-expected tax rate helped the tax service provider deliver earnings that came in well ahead of analyst expectations.

“While there were a number of quirks this season, we are cautiously optimistic that volume trends will improve as we once again expect HRB to focus on this metric,” said BMO Capital analyst Jeffrey Silber.

BMO suggested that it prefers to wait out the recent share price spike following the earnings beat to revisit its Market Perform rating on the stock.

However, the analyst raised his price target on the stock from $26 to $31.

H&R Block also announced a 9 percent increase in its quarterly dividend to 24 cents.

Much of the improvement in company earnings came from promotional activity; the Refund Advance Program, free federal and state DIY product. Although management didn't comment on continuing these promotions in 2018, Silber believes it will to maintain momentum in a competitive market.

BMO also upped its 2018 EPS estimate from $1.87 to $2.03.

“We are the first to admit we have missed the stock’s strong performance this year, but prefer for the ‘dust to settle’ following what we expect to be a strong day tomorrow,” said Silber.

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