Shares of U.S.'s largest tax preparer H&R Block Inc. (NYSE: HRB) are surging today after the company announced last night better-than-expected third-quarter earnings results. H&R also issued encouraging earnings guidance and showed optimism about successful negotiations for its remaining Option One Mortgage sale.

H&R announced its quarterly loss narrowed to $47.4 million, or 14 cents per share, helped by higher sales and smaller losses from its subprime mortgage lending subsidiary, up from its loss of $60.3 million, or 18 cents per share in the same period last year.

Included in the company's earnings was a $26.3 million pretax charge related to staff reductions expenses and executive departures. Excluding that, H&R Block's earnings numbers would have come at 8 cents per share. Analysts' estimates (which typically exclude one time items) was for 6 cents per share in the quarter.

Looking at revenue, the company posted $972.6 million, missing analysts' forecast for quarterly revenue of $1 billion, according to Thomson Financial. The company said that retail tax preparation and related fees jumped 12.6% compared with the same period a year ago. The number of retail clients also saw a gain of 6.8% in the month of February.

Looking ahead, H&R said it expects positive earnings figures for the year. H&R Block believes that subprime mortgage losses will be offset by higher tax revenue and cost cuts. Thus, the company expects 2008 earnings to be toward the low end of its $1.30 to $1.45 per share forecast range, including $26.3 million related to severance charges. Analysts, on average, expected H&R show a profit of $1.29 per share.

In addition, the company expressed its enthusiasm about a possible deal regarding the sale of the remaining pieces of Option One Mortgage Corp. Richard Breeden, H&R's Chairman, said the company is confident it will get "a signed contract in the near future."

Traders have expressed their enthusiasm over H&R Block's outlook, pushing the stock up 6.02% to $11.33 in morning trading.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.