H&R Block Rallies Following Q1 Report

Posted Sep 3rd 2010 11:00AM by Tom Taulli
Filed under: H and R Block (HRB)

It's been brutal for H&R Block (HRB). Its stock has gone from $23 to $12.50 a share over the past year. But in the latest earnings report, there was some hopeful news for shareholders. In fact, H&R Block's shares were up 8% following the report. However, there are still challenges for the company and its probably better to look at the stock early next year, at the start of the new tax season.

In the fiscal first quarter, H&R Block posted a loss of $130.7 million, or $0.41 per share. Of course, the shortfall is normal because of the seasonality in the business.

While H&R Block is cutting costs, the company also realizes it needs to rethink its overall strategy. For example, the company wants to put more resources into its debit card. Simply put, this program has been a success, creating a nice revenue stream as well as improved client retention.

Next, H&R Block realizes it needs to get serious about its online strategy. Even though traffic has been increasing, the site is fairly confusing. So expect a revamped web presence, which should help improve customer conversion rates.

All in all, the moves are encouraging. However, it still looks like next year will be tough. After all, the IRS has been clamping down on taxpayer refund loans. What's more, the persistent unemployment rate will continue to take a toll. Keep in mind that H&R Block has seen two consecutive years of client losses.

Tom Taulli is also the author of several books, including the Complete M&A Handbook as well as the upcoming book, All About Short Selling.

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