Analyst Update: H & R Block Inc, Dollar General Corp., and L Brands Inc

Analysts are weighing in on H & R Block Inc (HRB), Dollar General Corp. (DG), and L Brands Inc (LB)

Nov 28, 2016 at 3:47 PM
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U.S. stocks are on pace to close lower, finally taking a breather from their post-election rally. Among specific equities in focus today are tax specialists H & R Block Inc (NYSE:HRB), as well as retail stocks Dollar General Corp. (NYSE:DG) and L Brands Inc (NYSE:LB). Here's a quick roundup of today's brokerage notes on HRB, DG, and LB.

  • HRB is down 8.6% at $21.92 -- set to snap a six-day win streak -- after receiving its first "sell" rating from BTIG, which downgraded the shares from "neutral," citing concerns that tax simplification measures put forward by the Trump administration could jeopardize the company's business. Heading into today's session, HRB shares had added roughly 9% in a post-election rally, which BTIG analyst Mark Palmer said "reflects complacency in the aftermath of the election." With today's drop, H & R Block Inc's shares have erased their month-to-date gains, widening their 2016 deficit to 34%. In the stock's option pits, meanwhile, bullish betting has ramped up in recent weeks. HRB's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) now sits in the top quartile of its annual range, at 2.90. An unwinding of these upbeat positions could serve to pressure HRB shares even lower.

  • DG has shed 1.6% to $78.79, as the company prepares to report third-quarter earnings later this week. While sector peer Dollar Tree, Inc. (NASDAQ:DLTR) popped on an earnings beat last week, Barclays analyst Karen Short cautioned that Dollar General Corp. may be facing different headwinds. The brokerage reiterated its "equal-weight" rating, and $70 price target -- representing an 11% discount to current trading levels. Although DG is up more than 9% year-to-date, the shares have tumbled 18.7% from their late-July highs. As of Friday's close, the stock's 14-day Relative Strength Index (RSI) of 82 sat well into overbought territory, indicating a breather may have been in the cards. 

  • LB is 0.1% higher at $71.87, thanks to an upgrade to "neutral" from "underweight" at Piper Jaffray, which cited holiday spending momentum, saying it's possible that "broad-based relief is on the horizon for consumer discretionary spending," and thus the retail sector. L Brands Inc recently reclaimed a foothold above the 160-day moving average, which had contained several rally attempts since August. The stock is also just shy of closing its early-November bear gap. Now looks like an excellent time for buyers to get in on LB's short-term options, with the equity's Schaeffer's Volatility Index (SVI) of 24% seated in the low 9th percentile of its annual range, indicating near-term options are pricing in unusually low volatility expectations. 
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