Why H&R Block Stock Is Surging Today

What happened

Continue Reading Below

H&R Block (NYSE: HRB) shares are moving higher by about 15% as of 12:45 p.m. EST on Wednesday after the company reported earnings and provided an update on the 2017 tax season.

So what

The tax preparer reported that revenue declined about 5% year over year, to $451.9 million, during its fiscal third quarter, which ended on Jan. 31, 2017. Its net loss grew to $104.5 million ($0.50 per share) compared to a loss of $81.7 million ($0.35 per share) in the same period last year.

Image source: Getty Images.

Revenue and profits for the tax preparation industry are typically seasonal, as business picks up during the spring tax season. H&R Block noted in its earnings release that it gained market share during the slow start to the 2017 filing season. The table below shows that H&R Block volume declined at a rate lower than that of the industry, in the categories of assisted tax preparation services and do-it-yourself products. (The company uses IRS data for the industry figures.)

Data sources: H&R Block earnings report.

To find out who is losing share, look no further than H&R Block's rivalLiberty Tax (NASDAQ: TAX). The company reported on Wednesday that it processed 16.4% fewer returns from the start of the year through Feb. 28.

Liberty Tax CEO John Hewitt said that "[t]he whole industry has been slow, but we are clearly not satisfied with how we have performed in comparison to the market. There is still a lot of season in front of us and we are focused on delivering a strong second half and on implementing the appropriate changes to be successful in an evolving landscape." Shares are up by about 6% today as investors expect the tax season to develop better than previously anticipated.

Now what

Americans have been filing their taxes later in recent years, which makes for a delayed surge of revenue and profits for tax preparation companies. H&R Block and Liberty Tax have a fiscal reporting calendar that is designed such that their fourth quarters span virtually all of the busiest part of tax season, from Feb. 1 to April 30. That means investors will have to wait for the end of tax season to see which companies were winners and which were losers.

10 stocks we like better than H and R BlockWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and H and R Block wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.