In the past, many people have filed their taxes for free with H&R Block. January through April is H&R Block’s make-or-break season due to tax filings. The company brings in enough revenue in the early spring to cover any losses over the rest of the year. 2014 stands out as a year of smart, positive changes at H&R Block.
This year, the company has decided to downsize its unprofitable retail operations and cut down on free tax form preparation. As a result of these changes, there was a slight drop in tax returns prepared in H&R Block offices this tax season. Industry analysts polled by FactSet predict earnings per share of $3.26, quite an increase from $2.42 a year ago. This increase can be attributed to the aforementioned strategic changes at the company.
There are other changes happening within H&R Block in 2014. In April, the company signed a deal to sell its bank. This deal has been in the works for quite some time, and the stock market rejoiced upon the news. This is not to say that the bank is a drag on earnings. Selling the bank frees management from the burden of regulatory oversight on banks, and it gives people the option to buy back even more shares.
Another recent development at H&R Block is their plan to increase revenue as a result of the Affordable Care Act. As the law is implemented, health insurance and taxes are becoming more and more intertwined. Difficulties with connecting consumers to insurers presents an opening for H&R Block to expand its business model beyond tax preparation and financial services.
Despite the good news on the bank sale and health insurance opportunity, the company’s stock is still priced to sell. Get it below cost, before the stock price catches up to these recent improvements.