Tax preparer H&R Block said on Monday it swung to a quarterly profit from a loss, beating estimates and driving the stock 6.6 percent higher, as revenue rose 11 percent.
he company, rejuvenated by the sale of its Option One mortgage servicing business to billionaire Wilbur Ross in April, forecast a full-year profit that was also higher than the market was expecting.
"The balance sheet is significantly better year over year and I suspect it will be much better next year now that we have the subprime mess behind the company," said Alex Paris Jr, an analyst with Barrington Research in Chicago.
Traders had positioned themselves for a grim set of numbers earlier this month, driving the stock 10 percent lower on June 20.
In particular, they expressed concern about the company's guidance, noting that cash-strapped households may start doing their own taxes rather than pay H&R Block to do them.
Paris, who does not own H&R Block shares, said the results were excellent and that concerns H&R Block's business would drop off in an economic downturn were unfounded.
"We've had economic slowdowns in the past. The professional filing of taxes tends to be recession resistant," he said, noting that many filers use professional tax preparers in order to access their refunds more quickly.
Paris is among the top rated at forecasting the company's earnings and stock moves as tracked by research firm Starmine, a Thompson Reuters company.
The company reported a fiscal fourth-quarter net profit of $543.6 million, or $1.66 per share, compared with a loss of $85.6 million, or 26 cents per share, in the same quarter a year ago.
Earnings from continuing operations rose 17 percent to $2.11 per share, beating analysts' estimates of $2.03 per share, according to Reuters Estimates.
The company forecast earnings from continuing operations of $1.60 to $1.70 per share for 2009, its current fiscal year. Analysts are expecting $1.57 a share.
H&R Block earns the bulk of its annual profit in its fiscal fourth quarter, the tax-filing season for Americans.
"We are confident that for the three-year horizon through fiscal 2011, we can realize significant gains in earnings per share through unit growth, greater efficiency in our tax and other operations, and capital deployment, rather than relying solely on annual price increases for growth," said Alan Bennett, interim chief executive.
Revenue rose to $2.6 billion as tax services revenue grew 13.4 percent to $2.2 billion.
H&R Block said its U.S. retail client base grew 3.8 percent and the number of international clients grew 6.1 percent, with particularly strong growth noted in Canada.
More than half of the revenue increase and one-third of the profit increase from the international business resulted from favorable exchange rates, it said.
The company said it would raise its annual cash dividend to 60 cents per share, resulting in a quarterly dividend of 15 cents per share beginning with the dividend payable Oct. 1.