NEW YORK (TheStreet) -- H&R Block (HRB) has been reiterated as an "outperform" stock with a $34 price target, Oppenheimer said Friday. The reiteration comes after the consumer tax agency announced it would divest its bank unit to BofI Holding (BOFI) for an undisclosed amount.
"The transaction appears solid across key measures, with the most core being the pending H&R Block Bank 'surrender' of its bank charter, which would remove a major regulatory overhang tying up capital in HRB's otherwise capital-light business. It significantly enhances future financial flexibility/potential return of capital to shareholders," analyst Scott Schneeberger wrote in a report.
The investment firm notes the partnership is a positive given BofI holding is large enough to handle anticipated seasonal surges in deposit flows from H&R's financial offerings, but not so large it encounters too many regulatory challenges from the Federal Reserve.
Schneeberger added, "HRB should benefit from BOFI's partnership in building the percentage mix of reloads HRB could potentially generate from the ~2.5M customers who take their tax refunds each year on HRB's Emerald Prepaid (debit) cards."
Oppenheimer rates BofI Holding as a "perform" stock.
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 and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and relatively poor performance when compared with the S&P 500 during the past year."