Tax season may be over, but investors are cheering for
Shares of H&R Block (ticker: HRB) surged more than 13% Wednesday after the tax preparation company’s fiscal 2022 results topped Wall Street’s expectations. H&R Block’s stock is poised to close at an all-time high and is on pace for its largest percent increase since May 11, when it rose 19.5%.
The Street was also encouraged by H&R Block’s guidance for fiscal 2023. The Kansas City-based company expects to see revenue in the range of $3.535 to $3.585 billion and earnings per share in the range of $3.70 to $3.95, which represents a 9% year-over-year gain at the midpoint.
Part of H&R Block’s success can be attributed to the goals listed in its 2020 investor day presentation coming to fruition. While H&R Block will always be associated with tax prep for households and small businesses, it plans to leverage those relationships to provide year-round financial help. Those efforts can also help to smooth out earnings throughout the year, as the company historically has lost money for the quarters that aren’t tied to tax season.
“We like to see the market starting to hear the story,” Jeff Jones, chief executive at H&R Block, told Barron’s. “In addition to performing and executing, we’ve tried very hard to help people really understand that our transformation is underway. We are changing the company. We are getting different results and we are rewarding shareholders.”
While H&R Block shares have gained mightily over the last two years, it’s been a challenge to analyze results because of pandemic-induced changes to the typical calendar. While those shifts caused revenue that would normally be booked during the traditional tax season to be realized in other quarters, the uncertainty of the tax season due to Covid-19 meant more households and businesses needed H&R Block’s help.
That’s likely to continue even as the economy returns to normal, as the nature of work is unlikely to return to pre-pandemic norms. Workers have increasingly started working from states that differ from where their companies are based, and some have found success in so-called side hustles.
“We definitely saw the composition of income be different. That has meant side hustles turning into more regular 1099 jobs or multiple 1099 jobs. That’s real and how that shows up in our business is that customers are seeking expertise more than ever,” Jones said. Rather than needing assistance at tax time, customers seek advice year-round.
H&R Block shares are up 87% this year, including Wednesday’s gains.
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