H&R Block shares plunge nearly 20% after new tax law takes ‘bite’ out of profit forecast


Investors are panicking over H&R Block’s new financial guidance.

The shares of the tax preparation company declined 19 percent in early trading Wednesday, a day after it gave a sales guidance range of $3.05 billion to $3.1 billion for its fiscal 2019 versus the Wall Street consensus of $3.14 billion. H&R Block also gave an EBITDA profit margin target range of 24 to 26 percent for fiscal 2019, down from the nearly 30 percent EBITDA margin it reported for fiscal 2018.

“One of the key aspects of our bearish thesis on H&R Block (HRB) has been that tax simplification arising from the U.S. tax reform enacted in December 2017 ultimately would have a negative impact on the company’s revenues and earnings,” BTIG analyst Mark Palmer wrote in a note to clients Tuesday. “The 4Q18 report that HRB delivered today after the market close saw simplification finally take a bite out of the company’s future prospects.”

On the flip side, H&R Block CEO Jeffrey Jones said the tax law changes could present an opportunity for the company.

“We believe that a better value proposition and more clear differentiation leveraging all the assets that make H&R Block the leading tax preparation company give us the opportunity to win back clients,” he said on the company’s earnings conference call Tuesday.

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