Why Is H&R Block (HRB) Down 16.7% Since Last Earnings Report?

It has been about a month since the last earnings report for H&R Block (HRB). Shares have lost about 16.7% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is H&R Block due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for H&R Block, Inc. before we dive into how investors and analysts have reacted as of late.

H&R Block Reports Q4 Earnings Beat

H&R Block reported impressive fourth-quarter fiscal 2026 results, with both earnings and revenues beating the Zacks Consensus Estimate.

HRB’s adjusted earnings of $2.38 per share topped the Zacks Consensus Estimate of $2.23 by 6.7% and increased 4.8% year over year. 

Revenues of $1.14 billion surpassed the consensus mark of $1.12 billion by 2.5% and rose 3% year over year. Assisted tax preparation and Wave contributed to growth. During fiscal 2026, client conversion improved 200 basis points, while retention increased 190 basis points.

HRB's Assisted Tax Business Supports Growth

U.S. tax preparation and related services revenues increased 2.8% year over year to $1 billion in the fiscal fourth quarter. Assisted tax preparation revenues rose 4.1% to $714.2 million, while Refund Transfer revenues advanced 6.4% to $23.7 million. Tax Identity Shield revenues increased 15.8% to $17.3 million.

The company maintained Assisted category market share during the 2026 tax season after two consecutive years of improvement. Company-owned tax returns increased 2% for fiscal 2026, while net average charge at company-owned operations rose 4% to $282.89. Management attributed stronger performance to improved conversion, retention and a shift toward more complex clients.

H&R Block Sees Wave & International Gains

International revenues increased 5.6% year over year to $94.9 million in the quarter. Wave revenues climbed 12.3% to $33.2 million, continuing momentum in the company's small-business offering.

For fiscal 2026, Wave posted its second consecutive year of double-digit revenue growth, supported by paid ProTier subscriptions and higher payments volume. Management continues to view small-business services as an important growth opportunity as it integrates expert advice, products and digital capabilities.

HRB's Expense Growth Moderates Profit Gains

Fiscal fourth-quarter operating expenses increased 3.8% year over year to $768.1 million. Compensation and benefits rose to $396.8 million from $383.1 million, while occupancy costs increased to $117.5 million from $112.8 million. Marketing and advertising expenses advanced to $69.1 million.

EBITDA increased 1.8% to $420.5 million. Adjusted net income declined 1.6% to $304.2 million, but adjusted earnings per share rose as the weighted-average share count fell 6.3% to 127 million. The reduction reflects H&R Block's continued share repurchases.

H&R Block Strengthens Client Economics

Management highlighted continued improvement in the quality of its client base. The share of clients within its targeted household adjusted gross income range of $50,000-$200,000 has increased from 38% to 50% over the past few years. H&R Block is serving more clients with investment income, small-business needs and more complex income streams.

Technology remained central to the strategy. Artificial Intelligence (AI) Tax Assist handled 4.2 million client interactions during the season and generated nearly twice the engagement of the prior year. Client Experience Monitors contributed to a 550-basis-point increase in product attachment, while the company's Sidekick AI assistant supported tax professionals handling complex questions.

HRB Delivers Strong Cash Flow

H&R Block generated $838.7 million of operating cash flow in fiscal 2026 and $756.1 million of free cash flow. It returned $713.7 million to shareholders through dividends and share repurchases, including $500.3 million spent to repurchase about 10.5 million shares.

The board raised the quarterly dividend by 10% to 46 cents per share.

HRB Provides Other Fiscal 2027 Guidance With Higher Outlook

For fiscal 2027, HRB expects revenues to be between $4.11 billion and $4.16 billion. The company has guided its adjusted earnings in the range of $6.04 to $6.24 per share. The consensus estimate for the same is $5.81 per share. 

Adjusted EBITDA is projected in the range of $1.11 billion to $1.14 billion. The effective tax rate is forecasted at roughly 23%.

HRB expects about $400 million of share repurchases in fiscal 2027 and has approximately $600 million remaining under its current $1.5 billion authorization.

Management expects industry growth to remain below the historical norm but sees opportunities from assisted market-share performance, small-business growth and selective franchise acquisitions. The company plans greater investment in automation and its consultative client experience while maintaining cost discipline.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -8.59% due to these changes.

VGM Scores

Currently, H&R Block has a average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a score of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, H&R Block has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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