H&R Block Update: The Competition Is Struggling

| About: H&R Block (HRB)

In November, I wrote about H&R Block (NYSE:HRB). The company has rebounded nicely since then, up more than 40%. The company announced a blockbuster quarter this week, showing that Mr. Market’s concerns over the company’s ability to compete without its RALs were misplaced.

Tax season to-date results through Feb. 28:

  • Total tax returns prepared grow 6.0 percent.
  • Total retail returns prepared up 3.2 percent.
  • Total online returns prepared increase more than 30 percent; total digital returns up nearly 13 percent.
  • Net retail-office tax preparation fees through Feb. 28 decline 4.1 percent; improving from down 7.6 percent at Feb. 15.

Fiscal Third Quarter results ended Jan. 31:

  • Industry-wide slow start to tax season contributes to 8.9 percent decline in third quarter revenues to $851.5 million.
  • Net loss from continuing operations of $0.01 per share.
  • Adjusted non-GAAP third quarter net income from continuing operations of $44.0 million, or $0.14 per share, compared to $54.6 million, or $0.16 per share, in prior year.

The company gained 4.3% in yesterday’s market meltdown. An interesting sidenote is that its main “competition” (I put that in quotes, since this company has been in survival mode for a while, and not really putting up much competititon), Jackson Hewitt Tax Service (JTX) fell 41% yesterday after it suddenly canceled its quarterly earnings call:

Jackson Hewitt Tax Service Inc. (“Jackson Hewitt”), the nation’s second largest tax preparation company, today announced the cancellation of its 2011 third quarter earnings conference call and webcast (originally scheduled for Thursday, March 10, 2011 at 8:30 a.m. Eastern Time) in light of ongoing discussions between Jackson Hewitt and lenders under its senior secured credit agreement. As previously disclosed, pursuant to the credit agreement, Jackson Hewitt and the lenders agreed to use good faith efforts to agree upon a mutually satisfactory restructuring of Jackson Hewitt’s balance sheet and go-forward funding needs, and to execute definitive documentation relating thereto on or prior to April 29, 2011. Jackson Hewitt expects to file its Quarterly Report on Form 10-Q for the period ending January 31, 2011 on March 10, 2011 in compliance with the rules of the Securities and Exchange Commission.

Disclosure: Long HRB