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H&R Block Taxed for No Reason?

H&R Block lost 10% in Thursday trading, after reporting a less-than-stellar quarter. But Cramer said that was yet another Wall Street overreaction, and if anything this was a chance to buy the stock.

H&R Block missed earnings by 5 cents, reporting a loss of 40 cents a share versus the analysts’ consensus of 35 cents. Still, there are, Cramer said, good reasons for the miss that investors seem to have overlooked.

First of all, HRB’s business is seasonal, so you only want to own the stock for one quarter a year. And needless to say, this wasn’t it.

The main reason for the missed quarter, though, was the loan loss reserves and write-downs from H&R Block Bank. Luckily, Chairman Richard Breedon is getting out of the loan business – in fact, he’s getting the company out of every business but taxes – and he’s also dumping H&R’s financial advising division, another reason for the earnings weakness.

So Breedon’s taking steps to put H&R Block back on track. He’s even buying a large franchise operator with locations in Texas, Oklahoma and Arkansas that will bring 385 offices back into the company fold. The move will also expand H&R Block’s Latino-focused services in the South, and add 5 cents a share to the company’s earnings.

Then there are the usual things Cramer likes: a 2.35 yield and a $2 billion buyback, worth almost a quarter of the market cap.

So if you missed Cramer’s call on HRB last March, he thinks you’re getting a second chance at the action with the stock down two quick points.



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