NEW YORK – Shares of H&R Block Inc. (HRB) surged to a 15-month high Thursday after the largest U.S. tax preparer topped forecasts for fourth-quarter profit and projected fiscal 2006 profit exceeding analysts' views. It also said it will raise its dividend and split its stock.
H&R Block shares closed up $5.53, or 10.9 percent, at $56.18 on the New York Stock Exchange (search). They earlier rose as high as $56.34, their highest level since touching $56.41 on March 5, 2004.
"The quarter was solid, and indicated that the company is performing well in a challenging environment, with tax services growing more competitive, and even with a tougher interest rate environment for its mortgage business," said Alexander Paris, an analyst for Barrington Research in Chicago.
"The dividend increase and stock split indicates the board's confidence in H&R Block's future," he added. Paris rates H&R Block "market perform," and attributed Thursday's higher stock price mainly to the earnings results.
Kansas City, Missouri-based H&R Block Wednesday said profit in the quarter ended April 30 rose 7 percent to $616.5 million, or $3.66 per share, from $576.9 million, or $3.24 per share, a year earlier.
Analysts polled by Reuters Estimates on average had forecast $3.56 per share. Year-earlier comparisons reflect a restatement of fiscal 2004 results.
U.S. tax preparers generate much of their profit and more than half of their annual revenue during the main tax filing season, which ends April 15.
Quarterly revenue rose 7 percent to $2.36 billion.
Tax services revenue rose 6 percent to $1.7 billion, as pre-tax profit rose 5 percent to $845.7 million.
Mortgage services revenue rose 9 percent to $382.8 million, though pre-tax profit fell 5 percent to $166 million.
While falling interest rates and competition are crimping margins for many mortgage companies, they are also fueling higher demand for home purchases and refinancings.
H&R Block forecast fiscal 2006 profit of $4.25 to $4.65 per share, topping analysts' average forecast for $4.00.
It also said it will split its stock 2-for-1, and increase its quarterly common stock dividend 14 percent to 12.5 cents from 11 cents on a post-split basis.
On June 2, Jackson Hewitt Tax Service Inc. (JTX), the No. 2 tax preparer, said fourth-quarter profit rose 4 percent.
Separately, H&R Block said it awarded Chief Executive Mark Ernst a $398,640 bonus for his work in fiscal 2005. For fiscal 2006, it raised Ernst's base salary to $860,000 from $825,000, and agreed to give him 130,000 stock options and 15,000 shares of restricted stock.