H&R Block Surges to 15-Month High
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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.
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"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.
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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.
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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.
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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.