Why H&R Block Stock Is Surging Today

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What happened

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.

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    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.)

    Assisted Volume Change

    Do-It-Yourself Volume Change

    H&R Block






    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.

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