H&R Block Reports Net Loss On Subprime Woes, Misses Estimates

H&R Block's recent quarter saw its net income rise 9%, to $1.81 a share, below analyst estimates, but the company swung to an overall net loss on charges related to its ailing subprime-mortgage unit. The firm also projected current fiscal year estimates below consensus analyst expectations. Including losses related to its Option One subprime mortgage unit, H&R reported a net loss of $85.6 million, good for EPS of negative $0.26. Option One's losses totaled $676.8 million in the latest quarter; not counting that loss, earnings from continuing operations were $591.3 million (EPS of $1.81 a share vs. EPS of $1.63 in the year earlier period). Revenue rose 8% to $2.35 billion; Thomson Financial consensus estimates were for EPS of $1.88 on revenue of $2.44 billion. H&R Block announced it's selling Option One to Cerberus Capital Management for $300 million less than the value of the unit's tangible net assets later this year. Looking to the current fiscal year, H&R Block projects EPS in a range of $1.25-$1.45 a share; consensus estimates are for earnings of $1.47 a share. H&R shares are lower by 2.2% in pre-market trading, as of 8:13 a.m. EST.

Sources: Press Release, Wall Street Journal, Reuters, AP, Briefing.com
Commentary: H&R Block's Dividend Bluff • Profiting From The Tax Industry • H&R Block Grabbing Intuit's Business
Stocks/ETFs to watch: H&R Block (HRB). Competitors: Intuit Inc. (INTU), Jackson Hewitt Tax Service Inc. (JTX)

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