H&R Block Profit Declines

Tax preparation firm H&R Block(HRB) reported a 4% decline in earnings in its fourth quarter, a period that coincides with the federal and state tax filing deadline.

In the quarter, H&R Block earned $587.5 million, or $1.77 a share, down from $615 million, or $1.83 a share, in the year-ago period. The just-completed quarter included a charge of 2 cents a share stemming from a previously announced restructuring of its mortgage business.

Revenue in the quarter rose 6% to $2.5 billion. The fourth quarter normally is the strongest one for H&R, as that is the period in which it collects the greatest fees from tax preparation work

Analysts surveyed by Thomson Financial were forecasting earnings of $1.79 a share in the most recent quarter. Revenue was in line with analyst estimates.

Block offered earnings guidance for the new fiscal year that's generally higher than what most analysts are predicting. The Kansas City, Mo.-based firm says it expects full year earnings of between $1.80 and $2.05 a share. The current consensus estimate has H&R earning $1.92 a share.

"We expect solid growth in both Tax Services and Business Services and a more stable environment for operating margins in Mortgage Services,'' says H&R CEO Mark Ernst. "Ultimately, our results will depend on strong execution in Tax Services and our ability to operate effectively in the volatile mortgage market as the interest rate environment often creates unpredictable operating and competitive challenges."

The past year has been a rough one for H&R Block.

The firm previously has said it would restate its prior-year earnings to correct a $32 million underreporting of its state income tax obligation. The firm is being sued by New York Attorney General Eliot Spitzer over allegations concerning the marketing of its IRA investment product.

Shares of H&R closed at $22.50, up 10 cents on the day. In after-hours trading, the stock was up 30 cents to $22.80.

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