Is Intuit Losing Tax Business Back To H&R Block? (INTU, HRB)

Intuit Inc. (NASDAQ: INTU) is supposed to be the winner from the migration toward online tax return filings and the trend away from having actual people preparing tax returns.  What if that turns out to not be the case?  H&R Block, Inc. (NYSE: HRB) reported its year-to-date 2011 tax return data which showed a surprise in the relative strength against Intuit.

This morning we saw some data out of Credit Suisse that quantified some of the changes in digital reports here.  The total digital units for H&R Block rose by more than 7% on a year over year basis, while Intuit had closer to a 1% gain in total digital units.  Using the most recent updates, H&R Block’s online units were up over 27% versus about 6% for Intuit.  Credit Suisse noted that this was a 300 basis-point share improvement from H&R Block against Intuit.

Credit Suisse also noted that new online clients (excluding FFA) grew 46.2%, another suggestion that H&R Block is taking share.  Not all of the findings were bad for Intuit as the research noted that the Street expects upside to Intuit’s Consumer Tax guidance, but the firm warned that these results could show some potential risks to Intuit’s Consumer Tax revenue guidance of 10% to 13%.

What has changed? It seems that the online marketing of H&R Block and the free promotions are allowing it to take market share and have higher conversion rates.

There may be more than meets the eye here and there are some obvious caveats. Intuit recently faced some IRS delays that were disclosed at the start of the year.  The other caveat is that the year-to-date tax season is really only about half-way through, and that leaves much time for this to change.

Another issue to consider would be share prices versus 52-week highs.  H&R Block is up over 1% at $14.40 this morning in early indications but the 52-week trading range is $10.13 to $18.99 versus Intuit’s price of $52.00 and 52-week range of $31.71 to $54.68.

JON C. OGG