As Hamp;R Block (HRB) releases its fourth quarter [Q4] 2007 fiscal earnings results, Zacks senior business services analyst Sean P. Smith is reiterating his Sell recommendation and lowering his price target. Here are a few reasons why:
We maintain our Sell rating for Hamp;R Block, and have lowered our price target from $20 to $18, following the release of Q4 financial results. While we view the pending disposal of Option One to be a long-term positive, we note that the ultimate terms of the deal are still unknown, and that the company continues to carry the financial risk associated with the business until its sale.
While the tax services business is showing signs of improvement, we expect only a modest increase in recurring EPS [earnings per share] in 2008. Given these issues, we do not believe that significant price appreciation is warranted in the near-term.
Also, we believe that the handling of the sales process has damaged management's credibility. Management repeatedly insisted that their goal of receiving $1.3 billion for Option One was achievable as recently as late February, when the fallout from the sub-prime downturn was readily apparent. It now appears that the actual sale price may be roughly $500 million less than management had predicted.
Read the analyst report on HRB
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