H&R Block Squarely Beats Estimates
The Associated Press
06/29/09 - 06:25 PM EDT
KANSAS CITY, Mo. --
H&R Block(HRB Quote), the nation's largest tax preparer, reported better-than-expected profit for its fiscal fourth quarter on Monday as higher fees and more consumer financial services income offset a decline in the number of tax returns it prepared.
The news sent shares up nearly 5 percent in after-hours trading.
The Kansas City, Mo.-based company said it earned $706.9 million, or $2.09 per share, during the three months ended April 30. That's up from year-ago profit of $543.6 million, or $1.66 per share, and above the $2.05 per share expected by analysts surveyed by Thomson Reuters.
Revenue for the quarter sank 3 percent to $2.47 billion, coming in shy of Wall Street's $2.52 billion estimate.
Tax services revenue declined 3.2 percent during the quarter to $2.1 billion as the number of clients coming into H&R Block's retail offices to have their taxes prepared declined in a shift toward online filing.
H&R Block Bank saw quarterly revenue rise almost 15 percent and profit climb to $21.5 million, compared with a loss of $1.3 million during the same quarter a year ago.
For the year, the company said its retail offices prepared 5.8 percent fewer returns, which was partially offset by a 21 percent increase in returns filed through the company's online services and TaxCut software. H&R Block has ramped up its digital competition in the past year, providing a free online tax filing program for lower income customers and keeping the price of its TaxCut tax preparation software below that of industry leader Intuit Inc.'s TurboTax.
The company also reported that the average fee for retail tax returns increased 7.2 percent, reflecting more complex returns and a shift towards more affluent customers.
Revenue from RSM McGladrey, the company's business accounting arm, declined 4 percent to $304.9 million.
H&R Block has restructured some of its operations over the past year in a move to lower costs and improve responsiveness to market conditions. The company divested its troubled mortgage and securities brokerage business units, and last month said it would merge its retail tax, digital tax, franchise and field tax operations under the direct oversight of President and CEO Russ Smyth, as well as change its pricing and brand.
For fiscal 2009, the company said it earned $485.7 million, or $1.45 per share, compared with a loss of $308.6 million, or 94 cents per share, during the same period a year ago. Excluding discontinued operations, the company said it would have earned $1.53 per share, compared with $1.36 in the year-ago period.
Analysts, which typically exclude one-time items and discontinued operations from their estimates, had expected full-year earnings of $1.47 per share.
Annual revenue remained flat at $4.1 billion, slighly below the $4.2 billion expected by analysts.
Looking ahead, H&R Block forecast 2010 annual earnings between $1.60 and $1.80 per share, compared with analysts' $1.66-per-share average estimate.
The company released its earnings results after trading closed Monday. The report sent shares up 70 cents, or 4.5 percent, to $16.37 in aftermarket electronic trading, having finished the regular session up 25 cents at $15.67.
Last week, No. 2 U.S. tax preparer Jackson Hewitt Tax Service Inc. said profit for its fourth quarter fell 28 percent as the company saw a double-digit decline in the number of tax returns prepared.
