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Will This Price Target Increase Help H&R Block (HRB) Stock On Thursday?

Stocks in this article: HRB

NEW YORK (TheStreet) --H&R Block Inc.'s (HRB) price target was raised to $36 from $34 at Oppenheimer on Thursday due to the company's pending bank deal and the likelihood it will return more cash to investors.

The firm kept its "outperform" rating on the stock.

On Wednesday, H&R Block reported its 2014 fiscal results, posting a 4% increase in revenue to $3.024 billion, an 8% increase in EBITDA to $940 million, and a 5% growth in non-GAAP adjusted earnings per share to $1.67.

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Shares of H&R Block are lower by -0.40% to $32.02 in pre-market trading today. 

Separately, TheStreet Ratings team rates BLOCK H & R INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate BLOCK H & R INC (HRB) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has increased to -$627.95 million or 15.69% when compared to the same quarter last year. Despite an increase in cash flow of 15.69%, BLOCK H & R INC is still growing at a significantly lower rate than the industry average of 99.09%.
  • HRB, with its very weak revenue results, has greatly underperformed against the industry average of 2.4%. Since the same quarter one year prior, revenues plummeted by 57.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 1112.5% when compared to the same quarter one year ago, falling from -$17.71 million to -$214.71 million.
  • Currently the debt-to-equity ratio of 1.60 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, HRB has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: HRB Ratings Report
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