Earnings Preview: H&R Block's fiscal 2Q

H&R Block expected to post adjusted loss for fiscal 2nd quarter, preview upcoming tax season

Associated Press

LOS ANGELES (AP) -- H&R Block Inc. is expected to report before the start of regular trading on Thursday a smaller adjusted loss for its fiscal second quarter. The nation's largest tax preparation company typically turns in a loss in the August-to-October period because it takes in most of its revenue during the U.S. tax season.

WHAT TO WATCH FOR: The latest word on the company's plans to tackle the upcoming tax season.

Investors also will be listening for details on Block's plans for its banking arm, H&R Block Bank.

The tax services provider disclosed in October that it hired Goldman Sachs to help it explore options for the bank. Those options, Block said, could result in the company no longer being regulated as a savings and loan holding company by the Federal Reserve.

The Federal Reserve announced some proposed rules in June that would impose higher capital requirements on savings and loan holding companies. H&R Block contends that if the proposed rules are enacted it would have to hold on to significant additional capital.

Block has been reducing its spending on compensation, benefits, occupancy and equipment, but earnings have been hurt by large charges related to litigation and the sale of its former business consulting unit, RSM McGladrey.

In its fiscal first quarter, Block narrowed its loss to $107.4 million, or 39 cents per share, from $175.1 million, or 57 cents per share, in the same period last year. Excluding one-time items, its loss was 38 cents per share.

Revenue slipped 4 percent to $96.5 million.

WHY IT MATTERS: H&R Block is the nation's largest tax preparation company, offering services in company-owned and franchise retail tax offices, as well as online. In fiscal 2012, Block prepared 25.6 million tax returns worldwide.

WHAT'S EXPECTED: Analysts, on average, expect Block to report an adjusted loss of 41 cents per share on revenue of $129.6 million, according to FactSet.

LAST YEAR'S QUARTER: Kansas City, Mo.-based Block reported a loss of $141.7 million, or 47 cents per share, in last year's second quarter. Its revenue rose 8 percent to $129.2 million.