BTIG Downgrades H&R Block (HRB) to Sell; Sees Negative Impact from Trump Administration

November 28, 2016 6:52 AM EST
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Price: $23.27 -1.65%

Rating Summary:
    3 Buy, 9 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 23 | Down: 34 | New: 34
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BTIG downgrades H&R Block (NYSE: HRB) frm Neutral to Sell with a price target of $18, noting the potential impact from expected Trump policies.

Analyst Mark Palmer commented:

  • While we acknowledge that much of the rhetoric offered up on the campaign trail during the lead-up to the recent presidential election is unlikely to translate into policy, we observe that with the Republicans poised to control the White House and both houses of Congress the likelihood of the enactment of legislation that would simplify tax filing in a manner that could reduce the need for HRB's tax preparation services has increased significantly.
  • We also recall that Sen. Elizabeth Warren (D ¡V MA) last April introduced the Tax Simplification Act of 2016 ¡V proposed legislation that attracted presidential candidate Sen. Bernie Sanders (D- VT) as a cosponsor ¡V demonstrating the bipartisan appeal of such an approach.
  • In particular, we believe the ¡§Better Way for Tax Reform¡¨ unveiled by Republicans on the House Ways and Means Committee last June represents a threat to HRB's business insofar as it includes a proposal for the complex tax forms currently in use to be replaced with a postcard that has just 14 lines to fill out. At the very least, we believe tax simplification could accelerate the shift to online filing, a business line featuring thinner margins for HRB and one in which the company has been losing market share to Intuit¡¦s (INTU, Not Rated) TurboTax

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