H&R Block Inc. (HRB) dropped the most in almost eight months after the tax preparer announced preliminary profit and revenue that trailed analysts’ estimates and said it would cut about 350 jobs and close offices.
H&R Block fell 11 percent today to $14.95, the most since Sept. 2, and has declined 8.5 percent this year.
Diluted earnings per share from continuing operations for the fiscal year ending April 30 may be $1.09 to $1.15, the Kansas City, Missouri-based company said in a statement yesterday. The average estimate of eight analysts surveyed by Bloomberg was for adjusted earnings per share of $1.42. The job cuts and closing of 200 offices will contribute to a pretax charge of about $30 million, or 6 cents a share, the firm said.
“These steps are necessary so we can create a stronger company, invest in our future, and produce greater value for our clients and shareholders,” Chief Executive Officer Bill Cobb said in the statement. “These actions will allow us to compete more effectively.”
Cobb, 55, had increased spending on marketing and offered free services to recapture market share from competitors including TurboTax maker Intuit Inc. (INTU) H&R Block, the biggest U.S. tax preparer, also has grappled with the loss of revenue from refund-anticipation loans for the second year after U.S. regulators prompted HSBC Holdings Plc to stop offering them.
H&R Block said revenue will be about $2.9 billion, below the $3.1 billion average estimate of analysts in the Bloomberg survey. That is little changed from last year when excluding revenue from its RSM McGladrey unit, which H&R Block sold, according to figures released by the firm. Without adjusting for the sale, revenue would decline 23 percent, based on the company’s forecast.
Processed U.S. tax returns climbed 4.5 percent to 22.2 million this year as online returns increased 20 percent and retail returns rose 1 percent, H&R Block said in a separate statement. The company said that Phil Mazzini, president of retail tax services, resigned as of April 30.
The firm also said it is seeking a replacement for Chief Financial Officer Jeff Brown, who took the job on an interim basis in April 2010 after the departure of Becky Shulman. Brown will stay on with the firm as chief accounting and risk officer, the company said.
“These are unsettling changes when timed with the light” revenue in fiscal year 2012, Scott Schneeberger, an analyst at Oppenheimer & Co., wrote in a research note today. “However, in isolation, to us they seem acceptable pursuits and constructive long-term.”
H&R Block agreed to pay more than $28 million this week to resolve Securities and Exchange Commission claims its Option One Mortgage Corp. unit, now known as Sand Canyon Corp., didn’t tell investors it may be unable to make good on obligations to repurchase faulty mortgages without assistance. From Jan. 31 through April 24, Sand Canyon received new claims tied to home loans with principal of $543 million, H&R Block said yesterday in a regulatory filing.
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