NEW YORK (TheStreet) -- Shares of H&R Block (HRB) are gaining in Friday's early morning trading after analysts at Piper Jaffray initiated coverage with an "overweight" rating and a price target of $38.
"We see H&R Block's transformation from a diversified financial services company into a focused tax services play as a driver of earnings growth acceleration, with the anticipated divestiture of HRB Bank serving as an intermediate-term catalyst for growth and returns," analysts said.
They added that increasing tax complexities from the Affordable Care Act, improving employment trends in the U.S. and positive execution by new management combine to create an attractive operating outlook.
However, they noted some key risks, which include cyclical exposure, heavy competition, failure to divest retail bank, regulatory risk, and integration risk.
H&R Block provides tax preparation and related services to the general public primarily in the U.S., Canada, and Australia.
TheStreet Ratings team rates BLOCK H & R INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BLOCK H & R INC (HRB) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, good cash flow from operations, compelling growth in net income and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins."