Bottom-line results are usually negative during H&R Block's first two fiscal quarters of the year, but the second-quarter loss in earnings, which were reported last night after the market closed, nearly doubled as the mortgage business slipped into the red after a profit in last year's quarter.
Fortunately for H&R Block, management announced earlier in the month that it was exploring strategic options, which may include an outright sale, on its Option One Mortgage segment. In the meantime, the company is closing and consolidating Option One offices to minimize further downside as the mortgage market cools from its recent overheated status.
When the company's mortgage unit issues subside, investors hope that H&R Block will be able to revitalize flagging tax-preparation growth that forms the bulk of total revenue and throws off prodigious amounts of cash flow. Rival Jackson Hewitt
Having come to control an estimated 20% of the tax-filing marketplace, H&R Block has found growth harder to come by in recent years. The company has diversified into other businesses to keep growth chugging along, but decent top-line expansion has not resulted in robust cash flow generation as intended.
Management is throwing in the towel on mortgages, but it still has business-consulting services and consumer financial-services units to go along with the core tax-services segment. And while total company operating cash flow has been erratic, it is still substantial and allows for steady share repurchases and a decent 2.3% dividend yield.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.