S&P Lifts Outlook on H&R Block (HRB) to Stable

Standard & Poor's Ratings Services today revised its ratings outlook on H&R Block Inc. (NYSE: HRB) to stable from negative. At the same time we affirmed all ratings on the company, including its 'BBB' corporate credit rating.

We expect to rate the company's incremental debt at 'BBB' once details become available and subject to our review of debt issuance documentation.

The rating affirmation reflects Standard & Poor's view of Block's market-leading position in the retail tax preparation services segment, its strong market share, and its well-recognized brand that leads to stable revenue and profitability year over year. This is mitigated by the company's less conservative financial strategies than previously and its divestiture of various businesses over the past few years, reducing business diversity and increasing reliance on the highly seasonal assisted tax preparation business.

The outlook revision reflects our expectation for modest profit growth as the company continues to benefit from stability of the tax return industry, in which it is a market leader. We believe this will mitigate the increase in financial leverage in the near to medium term, which will weigh on the company's credit metrics.

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