Ahead Of The Bell: Jackson Hewitt Downgraded

NEW YORK (AP) — An Oppenheimer analyst downgraded tax return preparer Jackson Hewitt Tax Service Inc. on Thursday, citing a big jump in the stock price this summer and upcoming fiscal first-quarter results that may disappoint investors.

Jackson Hewitt reports its first-quarter results on Sept. 3. If the company doesn't lay out some meaningful benefits from a "strategic alternatives" exploration that began in early June, shares may drop, wrote analyst Scott Schneeberger in a note to investors.

He lowered his rating to "Perform" from "Outperform."

In early June, Jackson Hewitt hired a new CEO, Harry Buckley, a former chief executive of larger rival H&R Block Tax Services Inc., amid a double-digit decline in tax returns it prepared this year and lower profits. At the same time, Jackson Hewitt brought on a management consulting firm and investment bank Goldman Sachs as a financial adviser to "examine a range of strategic alternatives" for the struggling company.

The stock has risen 54 percent since then, and is up 83 percent in the last three months.

He also cautioned that Jackson Hewitt's deal with Wal-Mart Stores Inc. to provide tax services in about 1,050 new stores is getting a "mixed reaction" from the franchisees. A slow rollout may worry investors on the company's execution ability, and the cost of the rollout makes him less confident in his earnings estimates, he said.

Parsippany, N.J.-based Jackson Hewitt has about 6,600 franchises and company-owned offices throughout the U.S.