H&R Swings to Q3 Profit

H&R Block Inc. (HRB) reported quarterly earnings that easily topped analysts’ expectations as the biggest U.S. tax preparer added business from higher-income customers, increased fees and offered lower discounts.

In the latest third quarter, H&R earned $47.4 million, or 14 cents share, compared with a loss of the same amount in the year-ago period. Excluding discontinued operations, the Kansas City-based company’s profit was 20 cents a share, while analysts were looking for 9 cents. Revenue rose 11% to $993.4 million in the quarter ended Jan. 31.

Chief Executive Russ Smyth said the current downturn has driven away many of the company's traditional early-season customers, especially those with low incomes, who are either trying to prepare their tax returns themselves or avoiding filing returns altogether this year.

The company’s fourth-quarter results are considered as the most crucial as H&R generally runs at a cumulative loss for the rest of the year. The last quarter of the year accounts for approximately 60% of its annual revenue and well over 100% of its annual earnings.

"While the fiscal fourth quarter is always the critical driver for H&R Block's annual performance, we are nonetheless pleased with our results, notwithstanding the headwinds in the broader economy," Chairman Richard Breeden said.

H&R rose more than 10% to a three-month high of $19.34 on Friday.

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