Wondering if it's going to be a taxing year for H&R Block (NYSE:HRB)? The company has reported several stellar quarters with help from its mortgage business, a departure from the annual party of seasonal profit from its flagship tax preparation line. News agencies reported Wednesday that Block sees a "better" year ahead when it comes to its tax business.
Then again, H&R Block didn't budge from its guidance that calls for earnings of $3.65 to $3.85 for its fiscal year that will end on April 30. The competitive and economic climates contain several variables that invite a cautious approach.
H&R Block's bid to become a less seasonal company is hinged on its mortgage business, as Rick Munarriz pointed out a few months ago. As much as that's been a moving and shaking line of work -- just think of how everyone and your brother have been buying houses -- there are definitely some of us who find it inevitable that the home-buying frenzy will subside.
Meanwhile, back on the tax side of things, rival Intuit (NASDAQ:INTU) has been coming up with ways to woo customers for its tax software, including a TV ad campaign. Not to be outdone, Block has also said it plans a new ad campaign, according to Wednesday's news reports.
When it comes to H&R Block's competitive advantage, think Wal-Mart (NYSE:WMT). The company has tax preparation areas in many of the stores to woo Wal-Mart shoppers.
Despite the idea that an improving economy would spell good news for tax business, the customer base H&R Block targets contains some risk this year. According to a news report from Associated Press, last month the company urged caution due to the economy's "jobless recovery." Specifically, the company cited 300,000 jobless people or so who were so frustrated looking for work last year, they just up and stopped looking.
Indeed, many of us probably know at least a few people who took their unemployed status as an opportunity to go back to school and get an advanced degree -- and maybe even some who decided to ace Beer Drinking 101. I know scholars in both schools of thought.
Though H&R Block is predicting a better year for tax returns, the unemployment rate is still a concern. And investors seem to be looking for signs that the core tax business is still strong, given the idea that home sales may fizzle out. Time will tell if it's shaping up to be a wild H&R Block party of profits this year.
Are you maxed out with tax anxiety? Check out our Tax Center, or chat with other Fools about the issues on the Tax Strategies discussion board. Alyce Lomax does not own shares of any of the companies mentioned, but she's a big fan of TurboTax software -- though not such a big fan of taxes.
