Mortgage Unit Seen as a Bear for Block

Kansas City, Mo.-based H&R Block has been named Zacks Equity Research's "Bear of the Day" for May 15, citing challenges in the company's mortgage and tax units.In its press release, the Chicago-based Zacks said Block's "management once again disappointed investors by announcing that earnings in fiscal year 2006 will be at the low end of previous guidance. Competition remains intense in the tax business, while fundamentals in the mortgage business continue to deteriorate." Block, the parent of subprime wholesaler Option One Mortgage Corp., Irvine, Calif., put out a statement on May 10, saying its full-year earnings per share is expected to be slightly below the $1.65 low end of its predicted range, in part due to weaker than expected results from mortgage services. Block added that its earnings guidance did not include the effect of previously announced charges to resolve refund anticipation loan litigation and for related fees, or charges for consolidation of a number of mortgage operations to reduce ongoing operating cost structures. Block's fiscal year is structured so that the bulk of tax season takes place in its fourth quarter. Full year results are expected to be announced on June 7.