Episode Details

H&R Block (HRB) Q4 FY2026 — Q4 and full fiscal 2026 (ended June 30; 8-K accepted 4:10pm ET Aug 11, after the close, so Aug 12 is the reaction): Q4 adjusted EPS $2.38 vs a $2.21 bar, full-year revenue $3.95B up 4.9%. The stock gapped 16.1% to $54.18 and closed the week at $53.92. H&R Block beat, raised its dividend a 9th straight year and guided FY2027 earnings up 15.6%. But the 10-K says total assisted tax return volume FELL 0.1% and DIY paid volume fell about 4%. All the growth was price, and the buyback supplied 47% of the earnings growth. THE CALL: BUY (3/5, MODERATE - CHEAP, NOT RISKLESS) — base-case value ~$66.42 vs ~$53.92 today. KEY METRICS: - CALL: BUY, 3/5. Fair value $66.42 vs the $53.92 close on Aug 14, about 23% higher. Bear $43.95, base $69.12, bull $87.05, weighted 25/55/20. Street is a genuine Hold: 5 buy, 8 hold, 3 sell across 16 firms, target $46.50 - BELOW the tape, implying 14% downside. Conviction is 3 not 4: the bear case is a real 18% loss. - THE QUARTER (3 months ended Jun 30, 2026): revenue $1,144.9M, up 3.0% vs a $1,118.0M consensus. Adjusted diluted EPS $2.38 vs a $2.21 bar - a 7.7% beat. GAAP continuing-ops EPS $2.31, consolidated GAAP $2.30. EBITDA $420.5M. The line nobody quoted: net income from continuing operations FELL, $300.4M to $294.5M. EPS rose anyway - the share count did it. - THE FULL YEAR (FY2026): revenue $3,945.4M, up 4.9%. Net income from continuing ops $736.3M, up 20.8%. EBITDA $1,056.9M, up 8.3%. Adjusted net income $688.0M, up 6.9%. Adjusted EPS $5.31, up 14.0%. GAAP continuing EPS $5.69, up 28.7% - but that includes a one-time non-cash $84.1M IRS settlement benefit worth $0.65/share. Strip it and GAAP growth is 14.0%. - WHERE THE GROWTH CAME FROM - the two 10-K sentences that decide this: U.S. assisted revenue rose $147.7M or 6.1%, from a 4.0% rise in NET AVERAGE CHARGE and 2.0% more COMPANY-OWNED volume. But total assisted return volume, company-owned AND franchise together, DECREASED 0.1%. DIY revenue rose 0.2% on a 4.2% price rise, so DIY paid volume fell ~4%. All growth was price; unit growth was zero. - THE BUYBACK DID HALF THE WORK: adjusted net income rose 6.95%, adjusted EPS rose 13.95%. The 6.55-point gap is the denominator. HRB retired 10.5M shares, 7.9% of the company, for $500.3M at an average $47.48. Diluted shares fell 6.2%, 137.3M to 128.9M. The buyback supplied 47% of adjusted EPS growth; ~$600M is left on the $1.5B authorisation. - THE CASH AND THE VALUATION: operating cash flow $838.7M, up 23.2%; capex only $82.6M. After $57.6M of franchise acquisitions, owner free cash flow is $698.4M - a 10.5% owner yield. Dividend raised 10% to $0.46/qtr, a 9th straight increase, 3.41% yield; $713.7M returned, a 10.7% shareholder yield. 123.3M shares off the 10-K cover, EV $7,179M: 8.8x guided FY2027 EPS, 6.4x guided EBITDA. Capitalise owner cash at 10% assuming it NEVER grows again: $52.34, roughly the share price. What to watch: UP: total assisted return volume turning positive in March while net average charge still rises, plus a re-authorised buyback. DOWN: assisted volume down more than a point, charge growth under 3%, or free filing reaching assisted clients. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.