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H&R Block Affirms Guidance for 2008

Thursday March 6, 4:56 pm ET
By David Twiddy, AP Business Writer

H&R Block Says Stronger Tax Numbers to Offset Mortgage Losses in 2008

KANSAS CITY, Mo. (AP) -- H&R Block Inc. affirmed earnings guidance for the year Thursday, saying they expect higher tax revenue and cost cuts to offset continued losses from the company's subprime mortgage arm.

Officials also told analysts during a conference call that they were in "advanced" negotiations with several potential buyers over the remaining pieces of the company's Option One Mortgage Corp.

"We are optimistic we will have a signed contract in the near future," said Chairman Richard Breeden.

Shares rose 59 cents, or 3.4 percent, to close at $17.83 Thursday.

The company said it expected to earn toward the low end of its previously announced expectation of $1.30 and $1.45 per share...

I have mixed feeling about this company as a potential investment. I'm still not sure about potential liability from all those mortgage loans that were sold away over the last few years. Although they are exiting the mortgage origination business, does that limit all possible future liability? Can defaulted loans be "put" back to them?

As far as the tax business goes they are still enjoying good demand for their services and are still able to incrementally raise prices. I do wonder if there will be a long term shift towards lower cost alternatives. On the positive side they run a tight ship cost-wise and are still grwoing the business little-by-little.

JT :-)
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