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Tax Prep Phoenix: Jackson Hewitt Roars Back

Adam Rust's picture

Posted December 10, 2010

A spate of good news makes it clear that Jackson Hewitt (JTX) will live to see another tax season.

This morning, Jackson Hewitt shares are up another 35 percent. That adds to their mid-twenty percent gains yesterday.

Today, the good news follows an earnings report that is being interpreted as positive, even though Jackson Hewitt reported a quarterly loss of sixty cents per share. That is a mammoth loss for a

company that was worth only $1.10 at the moment, but the market expected that they would shed even more.

Yesterday, Jackson Hewitt released an 8-K that reported that they have secured 100 percent of their estimated need for refund anticipation checks. It is an indirect result of a new agreement between Santa Barbara Tax Products group and a small Minnesota community development financial institution.

Other impacts

It strikes me as odd that Republic Bancorp (RBCAA) hasn't been able to participate in JTX's sudden fortune. While there has been no change to their contract with JTX for settlement products, this still seems like good news. After all, if you are depending upon business with a potentially moribund partner, then news that they have new life adds a lot of certainty to their concern. The new contract between SBTPG and University National Bank is less a competitive threat than it is a shoring up of a problem.

The third factor is that these two events probably mean that Wells Fargo won't call the trigger of default on their outstanding line of credit with JTX. Wells could have done that last month. At this point, it doesn't make sense, anyway.  Calling in the credit would give Wells a claim on thousands of franchisee obligations, some leases, and a few contracts to offer settlement products. A landlord doesn't evict on the 28th day of the month. Wells won't call the trigger on December 10th.