H&R Block's second-quarter fiscal 2014 loss per share was wider
than both the Zacks Consensus Estimate and the year-ago quarter.
The topline also missed on both counts. In addition, expenses also
recorded an upswing. The company s decision to vend off H&R
Block Bank will free up additional capital, which can be deployed
in strategic opportunities. Moreover, the implementation of
Affordable Care Act will open up revenue generating avenues for
H&R Block. Its association with Go Health will help H&R
Block foray into the health insurance brokerage business. According
to management, the company has successfully captured market share
in the digital online category from Intuit for the third
consecutive year. Returning value to its shareholders will also
help retain investor confidence in the stock. However, fluctuating
debt-to-capital ratio and cash balance keeps us cautious. Also,
economic condition and exposure to international operations plays
an important part on its operational results. We retain Neutral
H&R Block Inc. (HRB) is a leading provider of tax
preparation services. The company employs some 100,000 tax
professionals and has served more than 550 million clients. Through
its subsidiaries, the company provides tax, retail banking,
accounting and business consulting services and products. Brothers
Henry W. Bloch and Richard A. Bloch founded the company in 1955. It
was organized as a corporation that year under the laws of the
State of Missouri and is headquartered in Kansas City, Mo.
H&R Block offers tax services through retail tax offices in
the U.S., Canada and Australia, and its H&R Block At Home
software and online solutions.
Currently, the company has two reportable segments: the Tax
Services segment and the Corporate segment. Effective May 1, 2009,
the company realigned certain segments of its business to reflect a
new management reporting structure. The operations of H&R Block
Bank have now been reclassified, with activities that support its
retail tax network's inclusion in the Tax Services segment, and the
net interest margin and gains and losses relating to its portfolio
of mortgage loans held for investment and related assets included
in the Corporate segment.
The Tax Services segment provides income tax return preparation
services, electronic filing services and other services and
products related to income tax return preparation to the general
public in the U.S., Canada and Australia. This segment also offers
the H&R Block Prepaid Emerald MasterCard and Emerald Advance
lines of credit through H&R Block Bank.
The Corporate segment includes interest income from U.S. passive
investments, interest expense on borrowings, net interest margin
and gains or losses relating to mortgage loans held for investment,
real estate owned, residual interests in securitizations and other
corporate expenses principally related to finance, legal and other
As most of the clients file their tax returns from January
through April of each year, substantially all of H&R Block's
revenues from income tax return preparation and related services
and products are received during this period. As a result, the Tax
Services segment generally operates at a loss through the first
eight months of a fiscal year.
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