H&R Block Beats Forecasts, Bullish on Tax Season

H&R Block Inc. (HRB), the world's largest tax preparer, Thursday posted a lower quarterly profit, but beat Wall Street forecasts and signaled the current tax season could be more profitable than last year's.

The Kansas City, Mo.-based company said through Feb. 15, tax preparation and related fees had risen 10.6 percent this year, reflecting a 4 percent retail client growth and a 6.3 percent increase in average fees per retail client.

That followed the company beating average analyst earnings expectations for the third quarter by a nickel, on the strength of strong increase in loan originations and average fees from tax clients.

That helped push the company's shares up $3.16, or 6.7 percent, to $50.20 in after-hours trading on Inet, after the stock fell 59 cents to $47.04 in Thursday trading on the New York Stock Exchange (search).

"The biggest positive is their tax client growth," said Kartik Mehta, a company analyst with FTN Midwest Securities Corp. "It was better than anyone was anticipating. H&R Block had a strategy to change their marketing and grow their offices and that paid off."

H&R Block said third-quarter net income fell 14 percent to $91.7 million, or 55 cents per share, compared with $106.7 million, or 59 cents per share, a year earlier.

Wall Street analysts on average expected the company to earn 50 cents per share, according to Reuters Estimates.

Revenue rose 7 percent to $1.03 billion. Analysts had forecast $1.01 billion.

H&R Block's mortgage business, which includes Option One Mortgage Corp. (search) and H&R Block Mortgage Corp (search), recorded loan originations of $8.4 billion, a 57 percent increase over the prior year. An increase in the number of account executives serving clients was the primary driver of this gain, the company said.

Mortgage services revenue declined 4 percent to $304.6 million, while pretax earnings were $111.7 million, down 28 percent.