Analysts give H&R Block mixed rating

March 26, 2006|By ANDREW LECKEY | ANDREW LECKEY,TRIBUNE MEDIA SERVICES

Where have you gone, Henry W. Bloch?

The co-founder of the H&R Block Inc. tax preparation firm for many years helped Americans make the best of each tax season with upbeat, personal television and radio commercials that made us feel he was in our corner.

The words "I'm Henry Bloch" provided the same reassuring tone that Dave Thomas gave Wendy's International or Walt Disney gave to his namesake kingdoms. Bloch was our friend in the tax business, if such a thing was possible.

Bloch, 83, is still around, with the honorary title of chairman emeritus, having stepped down as chairman in 2000. He now gives his famous name and his money to a variety of philanthropic causes.

Under discussion in 2006 is the behavior of the world's largest tax preparation firm (whose name includes "H" for Henry, "R" for late brother Richard and their last name with "k" substituted for "h").

First, there is discussion about performance. Net income fell 69 percent in the most recent quarter, including a sizable charge for a litigation settlement. In addition, technical problems with a new software distribution strategy caused problems early this year. Some branch offices are being closed and 600 positions cut. The company also reduced its guidance for fiscal year earnings.

Second, there is discussion about competence. The company is restating results for fiscal 2004 and 2005 due to miscalculations that underestimated its state tax liability by about $32 million.

Third, there are allegations about an investment it offers. New York has sued H&R Block, accusing it of fraudulent marketing of individual retirement accounts that it alleges are virtually guaranteed to lose money because of a combination of fees and low interest rates. The company vigorously denies this.

Analyst ratings on the stock are a mixed bag, according to Thomson Financial, consisting of one "strong buy," one "buy," four "holds," one "underperform" and one "sell." Take your pick.

Andrew Leckey writes for Tribune Media Services.

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