These 3 Tax Preparers Love Tax Season

Advertisement

Most of us hate tax season, but it’s the lifeblood for companies that make the bulk of their annual revenue from tax business.

It’s a mammoth and lucrative market for tax-preparation services, with more Americans than ever scrambling to get help. We spend 7.6 billion hours filing our taxes and hire over 1 million accountants to help us make the mid-April deadline.

And, of course, we all could use help deciphering the U.S. tax code, which has more words than the Gettysburg Address, Declaration of Independence and the Holy Bible combined, or nearly 8 million words. Some folks file online through the IRS website or use a tax program such as TurboTax to save time and money, especially for simple returns.

If you would rather a professional do it for you, expect to pay at least $75. However, more complex returns with a large number of itemized deductions and a Schedule E or C will cost around $400.

These big tax-services companies—like Uncle Sam—are more than happy to take your money; here’s an update on how their businesses and their stocks are faring:

3 Tax Preparers: H&R Block (HRB)

H&R Block HRBThe world’s largest consumer tax services provider has been struggling as of late. Ordinarily, the four-month period between January and mid-April is when H&R Block recoups eight months of losses. However, heading into tax season the company has posted five consecutive misses on analysts’ estimates and accumulated about $340 million in net losses for its fiscal 2014 third quarter ended Jan. 31. Sales were extremely sluggish as well, coming in 58% below a year ago for the same period, largely due to people holding off on filing until after February.

Another reason for the drop is that H&R Block discontinued a free federal 1040EZ promotion, resulting in 6% fewer returns prepared by the company through Feb. 28. Plus, the government shutdown at the beginning of 2013 delayed a start to this year’s tax season. H&R Block says the third-quarter performance is not indicative of full-year expectations and that it is on track to meet its goals.

It certainly hasn’t fazed investors. Shares of HRB reached a new 52-week high of $32.42 on Feb. 26, driven by a new user interface for its online business that’s expected to attract more customers and give exposure to international operations. H&R bought back 21.3 million shares worth $315 million in 2013 and is paying an industry-beating dividend yield of 2.83%. Trading around $30 shares are up 9% over the past six months.

3 Tax Preparers: Intuit (INTU)

intuit185More than 27 million taxpayers have filed from home already this year helping to boost sales of Intuit’s tax software, TurboTax, by 11% to 14 million units through Feb. 15.

One reason many taxpayers might be turning to home tax prep is that software packages are far better and easier to use than before. TurboTax gives you the option to start your federal return for free: If your return is simple and you’re filing a 1040-EZ form, you can complete your return and e-file for free. Or, you have the choice of selecting the deluxe, premier and home and business packages for $29.99 to $74.99 and having TurboTax prepare and e-file your taxes.

Intuit’s goal is to double the 5 million customers over the next five years in its small business group unit, which is expected to grow 10% to 12% this year. About 26 million Americans used TurboTax to file their returns in 2013. Like H&R Block, Intuit cut its estimate for the second quarter ended Jan. 31 because the IRS delayed the date that Americans could begin filing their 2013 tax returns by 10 days.

As a result, Intuit reported a net loss of $37 million in the fiscal 2014 second quarter, but about $80 million in revenue will shift into the third quarter. Intuit sees big opportunity in its QuickBooks product, which handles retail payment and mobile payments anywhere, with any payment type, on any device.

Intuit says this arena has a $5 billion potential. Shares are trading near $77 and are up 17% in the past six months.

3 Tax Preparers: JTH Holding (TAX)

libertyJTH Holding is the parent company of Liberty Tax Service, recognized as the fastest-growing tax preparation franchise company.

JTH has prepared almost 16 million individual income tax returns in more than 4,400 offices and online. Edison Ventures announced that it just sold the $3.3 million worth in TAX shares it bought in July 2012 for $45 million, generating a nearly 14x return on investment.

Forbes rated Liberty Tax seventh in the “Top 20 Franchises for the Buck” in 2012. It was also ranked one of the top franchise opportunities on Entrepreneur magazine’s annual Franchise 500 every year from 1998 to 2012. Founder and CEO John Hewitt is a nationally recognized name in the tax return preparation and accounting world. He founded two top tax preparation firms, and is a former H&R Block regional director.

TAX reported a net income increase of 13.3% or $4.1 million for the fiscal third-quarter ended Jan. 31 compared to a year earlier.  Its customer base grew 7.7% from the prior year’s third quarter and the number of returns processed in offices rose 6.1% to 1.14 million. Shares of TAX are trading just shy of $28 and are up 46% over six months.


Article printed from InvestorPlace Media, https://investorplace.com/2014/04/loves-tax-season-preparers-intu-hrb-tax/.

©2024 InvestorPlace Media, LLC