“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, June 12, 2017

by Ian Harvey

IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.


Option Trade - Texas Instruments Incorporated (NASDAQ:TXN) Calls

Friday, June 16, 2017

** OPTION TRADE: Buy the TXN JULY 21 2017 82.500 CALL at approximately $0.90. Sell price is left to your own judgment.

Or for the more cautious who wish to wait until TXN reports on July 25 ---

** ALTERNATIVE OPTION TRADE: Buy the TXN Oct 20 2017 85.00 CALL at approximately $1.90.

Tech stocks have been under major pressure recently, after jet-setting to record highs over the past few months. In fact, the Nasdaq-100 Index (NDX) just sent up a signal not seen in three years, and so-called "FAANG" stocks are in the red in spite of upbeat analyst attention. However, if recent history is any indicator, one of these tech stocks could be flashing "buy" right now: semiconductor name Texas Instruments Incorporated (NASDAQ:TXN), a company that designs, makes, and sells semiconductors to electronics designers and manufacturers worldwide.  This pullback of TXN shares provides a buying opportunity – in this case a call option.

Analysts have yet to buy into TXN's long-term rally, with 12 of the 20 brokerage firms maintaining tepid "hold" ratings. Should Texas Instruments once again bounce from its 80-day, a round of upgrades or an unwinding of pessimism in the options pits could propel the shares even higher.

Therefore, expect this pullback to be short lived especially with earnings coming up for Micron, and the rest in another month.

This is obviously a pullback, and not something more nefarious, due to the overwhelming response from buyers when the price of these stocks found oversold territory on each of the intra-day drops. This means buyers are stepping in as shares become priced well below a good sale.

Influencing Factors

Texas Instruments sees solid growth prospects in China owing to its strengths some of the country’s largest markets, including autos, industrial goods and personal electronics, the company’s top China executive said in an interview with Forbes China.

“We foresee in the next couple of years, still, that we have a lot of opportunities in the market,” said Texas Instruments’ China President Sandy Hu.

TXN was a relatively early U.S. investor in China during the reform era, marking its 30th year in the country in 2016. That effort has yielded results: Of TXN’s total revenue of $13.4 billion last year, some $6.0 billion was from products shipped into China, including Hong Kong, according to the company’s latest annual report. That compares with $5.8 billion in 2015 and $5.7 billion in 2014.

The company is particularly hopeful about China’s automotive market, expecting it to top the world with sales of as many as 35 million units in 2025, Hu said.  The dollar value of the electronics in each vehicle will be double that of the current gas car, giving new openings to TXN, Hu said.  Increasing demand for solar and green energy-related products as well as automation equipment will also help China’s overall industry market “move quite fast in the next few years” and potentially benefit TXN, she said.

Rather than new investment, Hu said the company needs to focus on “flawless execution” of its approach rather than make substantial new investments.  The company currently has integrated semiconductor production capacity, three research centers and 18 sales and application offices in the country.  Economists expect China’s GDP to grow 6-7% this year, so Dallas-based TXN also has a favorable macroeconomic environment going for it.

First-quarter EPS beat Standard & Poor's estimate of 85 cents per share, and similar consensus earnings estimates, by 11 cents. Sales grew at a surprising 13% on higher demand for both analog and embedded processors, and margins grew on higher volume. S&P estimates that there will be more chips in vehicles and that Texas Instruments' shares will benefit from an acceleration of high-end smartphone sales.

Credit Suisse's price target for TXN stock is $95 on the basis that it is growing faster than its peers and thus should be valued at 20 times 2018 estimated earnings of $4.50 to $4.65. Texas Instruments also throws off a 50-cent quarterly dividend that comes out to a yield of about 2.5%.

Since consolidating gains made in the first half of 2016, TXN shares advanced from about $72 in December to a high of almost $84.65 last week.

Texas Instruments last released its earnings results on Tuesday, April 25th. The semiconductor company reported $0.89 EPS for the quarter, beating the consensus estimate of $0.83 by $0.06. Texas Instruments had a return on equity of 34.50% and a net margin of 27.54%. The business had revenue of $3.40 billion for the quarter, compared to analysts’ expectations of $3.31 billion. During the same quarter in the prior year, the firm earned $0.65 earnings per share. The firm’s revenue was up 13.1% on a year-over-year basis. On average, equities research analysts expect that Texas Instruments Incorporated will post $3.93 EPS for the current fiscal year.

Analysts are also waiting for Texas Instruments Incorporated to report earnings on July, 24. They expect $0.95 EPS, up 25.00% or $0.19 from last year’s $0.76 per share. TXN’s profit will be $936.85M for 21.10 P/E if the $0.95 EPS becomes a reality. After $0.89 actual EPS reported by Texas Instruments Incorporated for the previous quarter, Wall Street now forecasts 6.74% EPS growth.

 Analysts and Hedge Funds Opinions

Vetr upgraded Texas Instruments from a “buy” rating to a “strong-buy” rating and set a $88.74 price objective for the company in a report on Monday, May 1st.

A number of other brokerages have also recently issued reports …..

  • Rosenblatt Securities began coverage on Texas Instruments in a research note on Wednesday, February 22nd. They set a “buy” rating and a $90.00 price target on the stock.
  • Cowen and Company upped their price objective on Texas Instruments from $77.00 to $82.00 and gave the company a “market perform” rating in a report on Wednesday, April 26th.
  •  Royal Bank Of Canada restated an “outperform” rating and issued a $84.00 price target on shares of Texas Instruments in a report on Tuesday, April 25th.
  • Finally, Mizuho restated a “neutral” rating and issued a $78.00 price target (up from $75.00) on shares of Texas Instruments in a report on Saturday, April 29th.

Two research analysts have rated the stock with a sell rating, fifteen have issued a hold rating, eleven have assigned a buy rating and two have issued a strong buy rating to the company. The company has an average rating of “Hold” and a consensus price target of $82.10.

Investor’s sentiment increased to 0.95 in 2016 Q4, moving up 0.01, from 0.94 in 2016Q3. It improved, as 46 investors sold TXN shares while 347 reduced holdings. 94 funds opened positions while 278 raised stakes.

Rhumbline Advisers increased its stake in Texas Instruments Incorporated by 0.9% during the first quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 1,753,135 shares of the semiconductor company’s stock after buying an additional 15,099 shares during the period. Rhumbline Advisers owned about 0.18% of Texas Instruments worth $141,233,000 at the end of the most recent quarter.

Several other institutional investors have recently made changes to their positions in the stock…..

  • Hamilton Point Investment Advisors LLC boosted its stake in Texas Instruments by 5.1% in the third quarter. Hamilton Point Investment Advisors LLC now owns 37,637 shares of the semiconductor company’s stock worth $2,641,000 after buying an additional 1,815 shares in the last quarter.
  •  Mitsubishi UFJ Securities Holdings Co. Ltd. raised its stake in shares of Texas Instruments by 12.8% in the third quarter. Mitsubishi UFJ Securities Holdings Co. Ltd. now owns 2,650 shares of the semiconductor company’s stock valued at $186,000 after buying an additional 300 shares in the last quarter.
  • Bahl & Gaynor Inc. raised its stake in shares of Texas Instruments by 45.2% in the third quarter. Bahl & Gaynor Inc. now owns 1,846,489 shares of the semiconductor company’s stock valued at $129,587,000 after buying an additional 574,446 shares in the last quarter.

Summary

Texas Instruments has streamlined itself and put a much larger emphasis on the per-share growth of free cash flow, rather than on revenue growth at any cost. The company has divested less profitable lines of business to concentrate and expand on analog and embedded products, while establishing the company as a dividend growth stock and stepping up share buybacks. It has positioned itself as the largest producer of analog chips and has matured into a truly blue-chip stock.

The primary result is that it has grown free cash flow per share by a compounded annual growth rate of 12% during a 13-year period while also paying out dividends.

Apart from macro events, Texas Instruments is an extremely stable company, with a diverse customer base spread across several industries and countless long-lasting products.

Texas Instruments Incorporated has a market capitalization of $80.67 billion, a P/E ratio of 21.55 and a beta of 1.16. Texas Instruments Incorporated has a 52 week low of $58.61 and a 52 week high of $84.65. The firm’s 50 day moving average is $80.78 and its 200-day moving average is $77.73.


Option Trade – Alibaba Group Holding Ltd (NYSE:BABA) Puts

Thursday, June 15, 2017

** OPTION TRADE: Buy the BABA JULY 21 2017 130.000 PUT at approximately $2.40. Sell price is left to your own judgment.

Large-cap “tech-related” names are in the firing line at the moment – taking some punishment at the moment – developing a significant bearish reversal -- and it looks as if this is going to be an on-going trend for the short-term.

Alibaba Group Holding Ltd (NYSE:BABA), an online and mobile commerce company, is certainly one of these names that has become affected. However, to be clear, the underlying growth story in Alibaba stock is alive and well through the intermediate to longer term.

Influencing Factors

On the daily chart, the breakout rally from May went into vertical overshooting mode in early June. The “exhaustion gap rally” from June 8 came on the back of positive wording from Alibaba’s CFO, who said she sees revenue growth near 50% for the fiscal year 2018. Since then, however, BABA stock has been visibly sluggish and now threatens to mean-revert back toward the closing price from June 7, which would fill the June 8 up-gap and also get the stock back into its year-to-date up-trending channel.

Analysts and Hedge Funds Opinions

Several equities analysts have issued reports on the company.

  • TheStreet lowered Alibaba Group Holding from a “b-” rating to a “c” rating in a report on Thursday, February 16th.
  •  Royal Bank of Canada reaffirmed a “buy” rating and set a $120.00 price objective on shares of Alibaba Group Holding in a report on Tuesday, May 16th.
  • Barclays PLC raised their price objective on Alibaba Group Holding from $130.00 to $132.00 and gave the stock an “overweight” rating in a report on Wednesday, May 10th.
  • Vetr raised Alibaba Group Holding from a “buy” rating to a “strong-buy” rating and set a $115.12 price objective on the stock in a report on Monday, March 6th.

One analyst has rated the stock with a sell rating, two have assigned a hold rating, thirty have issued a buy rating and two have issued a strong buy rating to the company’s stock. The stock has a consensus rating of “Buy” and a consensus price target of $129.74.

Advisors Asset Management Inc. lowered its position in Alibaba Group Holding Ltd by 42.6% during the first quarter, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 55,771 shares of the specialty retailer’s stock after selling 41,317 shares during the period. Advisors Asset Management Inc.’s holdings in Alibaba Group Holding were worth $6,014,000 as of its most recent filing with the SEC.

Summary

Alibaba Group Holding Limited lost -2.01% to reach $136.29 in the previous trading session. Overall, 35.35 Million shares exchanged hands versus its average trading volume of 12.76 Million shares. The relative volume of the stock is 2.85, while its market cap is $303.71 Billion.


Option Trade – Oracle Corporation (NYSE:ORCL) Calls

Thursday, June 15, 2017

** OPTION TRADE: Buy the ORCL JULY 21 2017 44.000 CALL at approximately $1.60. Sell price is left to your own judgment.

Oracle Corporation (NYSE:ORCL), a provider of products and services that address all aspects of corporate information technology (IT) environments, including application, platform and infrastructure, will release earnings on June, 15. Analysts forecast earnings per share of $0.73, down exactly $0.03 or 3.95 % from 2014’s $0.76 EPS. The expected ORCL’s profit could reach $2.99B giving the stock 15.40 P/E in the case that $0.73 earnings per share is reported. After posting $0.63 EPS for the previous quarter, Oracle Corporation’s analysts now forecast 15.87 % EPS growth.

Management's guidance is expecting revenue to come in at around $10.6b including currency headwinds. Management expects to move from minus 1% to positive 2% growth for the full year.

Oracle was late to the cloud party but is quickly making up for lost time with each successive quarter's sky-rocketing growth.

Oracle's combined SaaS and platform-as-a-service (PaaS) revenue jumped 73% to $1 billion last quarter. Including cloud infrastructure sales -- which rose a modest 17% to $178 million -- total revenue was $1.19 billion.

Oracle is making significant strides in its transition efforts to cloud software. With earnings scheduled for June 21, investors can expect more of the same in terms of continued hyper-growth as Oracle gains traction. Oracle's 1.7% dividend yield and relative value -- it's trading at 17.5 times forward earnings -- both work in its favor.

Influencing Factors

Oracle Corp. recently announced that it is adding a number of features to its Identity-based Security Operation Center (SOC) cloud services, which has gained significant traction in recent times.

The company stated that the new additions will enhance the cloud service’s machine learning, artificial intelligence (AI) and contextual awareness capabilities.

The new features include Adaptive Access capabilities in Oracle Identity Cloud Service intended for dynamic application access controls, advancing market-leading risk monitoring leveraging machine learning engines; and the expansion of Oracle CASB Cloud Service to help support Oracle SaaS solutions with automated threat detection.

The new features will improve the products' ability to handle growing security threats. The product has already been selected by more than 1 million users within a short span of six months. The enhanced features will help Oracle to attract new customers, which will drive top-line growth going ahead.

Improving top-line will eventually boost Oracle’s share price. The company has outperformed the S&P 500 on a year-to-date basis. While the index gained 10.4%, the stock returned 19.7% over the same time frame.

Also, Zacks had this to say…..

 “Oracle has outperformed the Zacks categorized Computer Software industry on a year-to-date basis. The company's offerings in SaaS and PaaS have gained significant momentum in the past few quarters, which improves competitive position against salesforce.com and Workday. Further, the introduction of Gen 2 IaaS data centers is expected to improve Oracle’s competitive prowess against Amazon. We believe the company’s growing cloud market share will continue to drive top-line growth for the foreseeable future. We note that the acquisition of Moat is a signficant addition to the Oracle Data Cloud that will boost ad measurement capability.”

The worldwide public cloud services market is projected to grow 18% in 2017 to $246.8 billion, up from $209.2 billion in 2016. This presents significant growth opportunity for Oracle, as it is shifting its on-premise licensing to cloud-based subscription business model.

In the third quarter of fiscal 2017, the company reported an increase of almost 62% (63% on a FX neutral basis) in Cloud revenues, which amounted to $1.2 billion. Of this, Cloud Infrastructure as a Service (IaaS) revenues contributed $178 million, surging 17% (19% on FX Neutral basis). The rest comprised Cloud Software as a Service (SaaS) and Cloud Platform as a Service (PaaS) segment revenues, which rose a whopping 73% (74% on a FX neutral basis).

Analysts and Hedge Funds Opinions

Oracle Corporation has earned a consensus recommendation of “Buy” from the forty-three brokerages that are covering the firm. One equities research analyst has rated the stock with a sell recommendation, fifteen have given a hold recommendation and twenty-three have issued a buy recommendation on the company. The average 1-year price objective among brokers that have updated their coverage on the stock in the last year is $46.23.

Oracle Corporation received a $49.00 price objective from equities researchers at Goldman Sachs Group, Inc. (The) in a report released on Monday. The firm currently has a “buy” rating on the enterprise software provider’s stock. Goldman Sachs Group, Inc. (The)’s price objective would indicate a potential upside of 8.82% from the stock’s current price.

Also, Oracle Corporation was upgraded by analysts at OTR Global to a “positive” rating in a research note issued to investors last Thursday.

Summary

It is expected that Oracle Corporation will beat Wall Street analyst estimates. More importantly, expect the stock to adjust upwards as a result. It appears that the analysts estimates are lagging - most of the consensus consists of forecasts made 3 months ago - which impedes the accuracy of said forecast. Lastly, it is believed that the current stock price does not reflect the company's potential, which will be revealed in the upcoming release.

Oracle Corporation has a 50 day moving average price of $45.11 and a 200-day moving average price of $42.38. The company has a market capitalization of $185.28 billion, a PE ratio of 21.30 and a beta of 1.13. Oracle Corporation has a 12 month low of $37.62 and a 12 month high of $46.99.


Option Trade - Sonic Corporation (NASDAQ:SONC) Calls

Wednesday, June 14, 2017

** OPTION TRADE: Buy the SONC JULY 21 2017 30.000 CALL at approximately $1.00. Sell price is left to your own judgment.

Fast food restaurant Sonic Corporation (NASDAQ:SONC), a company that operates and franchises one of the largest chain of drive-in restaurants in the United States, dropped in the early going yesterday after a downgrade to “Underperform” by Bank of America Merrill Lynch.

Sonic Corp. will release results for the quarter ended May 30, 2017 after the market closes on June 22, 2017. Analysts expect $0.41 earnings per share, down 4.65 % or $0.02 from last year’s $0.43 per share. SONC’s profit will be $17.63M for 17.87 P/E if the $0.41 EPS becomes a reality. After $0.15 actual earnings per share reported by Sonic Corporation for the previous quarter, Wall Street now forecasts 173.33 % EPS growth.

Sonic Corp. operates and franchises the chain of drive-thru restaurants in the United States. As of August 31, 2016, 3,557 Sonic Drive-Ins were in operation from coast to coast in 45 states, consisting of 345 Company drive-thrus and 3,212 franchise drive-thrus. As of August 31, 2016, its restaurant design and construction consisted of a kitchen housed in a one-story building, which was approximately 1,500 square feet, flanked by canopy-covered rows of 16 to 24 parking spaces, with each space having its own payment terminal, intercom speaker system and menu board.

Influencing Factors

Shares of Sonic Corp. are on a recovery track as they have regained 37.97% since bottoming out at $21.12 on Oct. 25, 2016, and the stock price is now up 9.92% so far on the year — still in strong territory.

SONC’s revenue has grown at an average annualized rate of about 2.1% during the past five years.

Currently, Sonic Corp. net profit margin for the 12 months is at 11.65%. Comparatively, the peers have a net margin 4.93%, and the sector’s average is 12.43%. In that light, it seems in good position compared to its peers but weakness can be witnessed when compared with the sector.

Analysts and Hedge Funds Opinions

Bank of America Corporation downgraded Sonic Corp. from a “buy” rating to an “underperform” rating and raised their price objective for the company from $27.00 to $30.00 in a research note on Tuesday.

Cowen and Company analysts commented, "We worry comps will be challenged in SONC's 2Q and 3Q, modestly trailing Street estimates. Shares' downside could be limited as SONC completed the previous initiative to refranchise to ~95% one quarter ahead of schedule, which could lead to a favorable company margin and G&A guidance update. Downside is further limited by targets to repurchase 17%+ of the company's market cap in 2017."

A number of other brokerages have also recently issued reports …..

  • Wells Fargo & Company assumed coverage on Sonic Corp. in a research note on Tuesday, May 23rd. They issued a “market perform” rating and a $30.00 price objective on the stock.
  • Canaccord Genuity reaffirmed a “buy” rating and issued a $30.00 price target on shares of Sonic Corp. in a research report on Friday, February 24th.

United Services Automobile Association increased Sonic Corp stake by 22.73% reported in 2016Q4 SEC filing. United Services Automobile Association acquired 90,000 shares as Sonic Corp (SONC)’s stock rose 6.84%. The United Services Automobile Association holds 486,000 shares with $12.88 million value, up from 396,000 last quarter.

Summary

As Sonic is near its highs for the year and with earnings approaching next week, watch for a strong announcement to propel the stock higher.

Sonic Corp. has a market capitalization of $1.25 billion, a price-to-earnings ratio of 21.37 and a beta of 1.82. Sonic Corp. has a one year low of $21.12 and a one year high of $30.91. The stock’s 50 day moving average price is $28.60 and its 200 day moving average price is $26.43.


Option Trade - Jabil Inc (NYSE:JBL) Calls

Tuesday, June 13, 2017

** OPTION TRADE: Buy the JBL JULY 21 2017 32.000 CALL at approximately $0.75. Sell price is left to your own judgment.

The electronic products solutions company, Jabil Inc. (NYSE:JBL), formerly Jabil Circuit, Inc., providing engineering, manufacturing and intelligent supply chain solutions to companies in a variety of industries - automotive, packaging, healthcare, retail and more, will announce its third quarter of fiscal year 2017 financials on Wednesday, June 14, 2017 after the market close.

This year alone, Jabil has gained 33%, contributing to the 60%-plus climb of the past year. Notably, shares of Jabil Circuit have outperformed the Electronics - Manufacturing Services industry's gain of 18.1%.

When Jabil reports earnings next, an expansion of 70% year-over-year is on tap … despite the fact that the company's only on tap for a 2% top-line expansion. Longer term, growth is expected to level out to 12% annually – which is great, considering the stock is trading for a multiple of the same level.

Analysts expect $0.22 EPS, up 120.00% or $0.12 from last year’s $0.1 per share. JBL’s profit will be $39.59 million for 35.05 P/E if the $0.22 EPS becomes a reality.

Influencing Factors

An excellent track record of exceeding the quarterly earnings expectations along with the encouraging third-quarter revenue outlook, consistent cash flows and continued focus on product enhancement improved Jabil's share price growth.

Apart from reporting better-than-expected second-quarter fiscal 2017 results, the company's revenue outlook for the third quarter has further buoyed analyst confidence. For the third quarter, Jabil anticipates total company net revenue to increase 2% (at mid-point) year over year and to be in the range of $4.25-$4.55 billion.

The stock has witnessed upward estimate revisions since its last quarterly results. The Consensus Estimate for the to-be-reported quarter is now pegged at 22 cents representing an increase of 15.8% from 19 cents expected 90 days ago. Similarly for fiscal 2017, the estimate has risen 8.3% (14 cents) to $1.83.

JBL’s ongoing realignment program which is aimed at significantly lowering expenses while maintaining the production capacities is quite positive. Although a negative financial impact is expected over the next two years, the company is looking forward to benefit considerably from this cost-savings initiative in the long-term. Consequently, this is likely to boost the bottom-line results.

Additionally, the company has ample liquidity to pursue shareholder returns, through share repurchase and dividend payout. As of Feb 28, 2017, cash and cash equivalents were $755.1 million. The company also stated that it was looking to enhance shareholder returns as a percentage of cash flow from operations to 40% from 20% currently but not exceeding $1 billion by fiscal 2018. Last year, it had announced a new $400 million worth repurchase plan. This robust shareholder returns plan will continue to retain investor interest in the stock.

Investor’s sentiment increased to 0.96 in 2016 Q4 - up 0.18, from 0.78 in 2016Q3. It improved, as 23 investors sold Jabil Inc shares while 112 reduced holdings. 40 funds opened positions while 90 raised stakes. 173.57 million shares, or 2.83% more from 168.79 million shares in 2016Q3, were reported.

 Analysts and Hedge Funds Opinions

ValuEngine upgraded shares of Jabil Circuit from a “hold” rating to a “buy” rating in a report on Friday, June 2nd.

A number of other brokerages have also recently issued reports …..

  • Royal Bank Of Canada restated a “hold” rating and set a $27.00 price target on shares of Jabil Circuit in a report on Tuesday, May 2nd.
  • Stifel Nicolaus boosted their price target on shares of Jabil Circuit from $26.00 to $29.00 and gave the stock a “hold” rating in a report on Friday, March 24th.
  • Finally, Goldman Sachs Group, Inc. (The) boosted their price target on shares of Jabil Circuit from $25.00 to $26.00 and gave the stock a “neutral” rating in a report on Thursday, March 16th.

Several institutional investors have recently made changes to their positions in the stock…..

  • Oppenheimer & Co. Inc. purchased a new stake in Jabil Circuit during the first quarter worth $218,000.
  • Boothbay Fund Management LLC purchased a new stake in Jabil Circuit during the fourth quarter worth $224,000.
  • PNC Financial Services Group Inc. raised its stake in Jabil Circuit by 1.3% in the first quarter.

Summary

It's proven lucrative of late; JBL stock is the best performer on the list of electronic products solutions by a landslide.

Jabil Circuit has a one year low of $17.27 and a one year high of $31.70. The stock has a market cap of $5.62 billion, a P/E ratio of 38.45 and a beta of 0.58. The company has a 50-day moving average price of $29.61 and a 200-day moving average price of $26.35.


Option Trade - H & R Block Inc (NYSE:HRB) Calls

Monday, June 12, 2017

** OPTION TRADE: Buy the HRB JULY 21 2017 27.000 CALL at approximately $0.70. Sell price is left to your own judgment.

H & R Block Inc (NYSE:HRB), a provider of tax preparation and other services, is scheduled to report its fiscal fourth-quarter results after the market closes tomorrow, on June 13. Analysts forecast earnings of $3.51 per share, up from $3.15 during the same period last year, which would represent 12% year-over-year growth. That's right in line with the company's long-term growth expectations, too. While a decline is expected next quarter, for instance, full-year growth and long-term growth are both slated for 10%.

H&R Block beat Wall Street's expectations in each of the past two quarters, too, while the $3.51 consensus is a dime higher than the average just three months back.

HRB’s fiscal fourth-quarter is very important for the company, since it is includes tax season, and is the only quarter during the year that the company is able to actually turn a profit. A

The stock has been solid all year, and shares have gained 14.9%. With the recent gains, the stock’s P/E is currently sitting at 17.6, which is not too high to keep the stock from building on its recent gains.

Analysts expect a strong quarter, setting a whisper number of $3.54 for the quarter, slightly higher than the consensus.

The stock is up 14.9% on the year.

Influencing Factors

H&R Block claimed in April that it won market share during tax season. Total U.S. returns declined by 0.8%, but do-it-yourself returns via H&R Block's software and website surged 6.8%.

Competitor Intuit has already reported its results, posting 9% revenue growth in its consumer tax segment. That performance was driven by a 2% increase in federal return volume and a mix shift toward higher-end products. In the DIY category, H&R Block probably picked up some unit market share.

One thing H&R Block touted in its press release announcing its tax-season results was its use of IBM's Watson for assisted tax prep at its thousands of locations. H&R Block pointed to Watson, as well as aggressive promotional offerings, as the drivers behind its improved performance.

Analysts and Hedge Funds Opinions

Zacks Investment Research upgraded shares of H & R Block Inc from a hold rating to a buy rating in a research report sent to investors on Wednesday morning. They currently have $30.00 price objective on the stock.

According to Zacks, “H&R Block outperformed the Zacks categorized Consumer Services – Miscellaneous industry in the past one-year period. The company remains focused on expanding its client base and lowering operating costs through stringent cost-cutting initiatives to drive future growth. H&R Block also made several enhancements to its online digital tax software to improve monetization and conversion. H&R Block further intends to focus on customer satisfaction by offering compelling product portfolio, both in the assisted and the DIY categories. The strategic partnership with GoHealth Insurance is likely to help H&R Block to foray into the health insurance brokerage business. This in turn will open up additional revenue-generating opportunities for the company. However, unfavorable foreign currency translation and employment-related lawsuits remain significant headwinds for the company.”

Summary

Despite the run, HRB yields around 3.5%. Expect a strong earnings report to turn even more investors bullish.

H & R Block has a market capitalization of $5.43 billion, a price-to-earnings ratio of 17.60 and a beta of 0.57. The company’s 50-day moving average price is $25.59 and its 200-day moving average price is $23.42. H & R Block has a one year low of $19.85 and a one year high of $27.36.




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