Jackson Hewitt shares fall following big rally

The stock slipped 75 cents, or 4.5 percent, to $15.97. On Tuesday, the Parsippany, N.J.-based company's shares jumped 7.2 percent, closing at $16.72. The stock is down about 47 percent since the start of the year.

Tuesday's gains came after a Stephens Inc. analyst upgraded the shares to "Overweight," or the equivalent of "Buy," from "Equal-Weight."

Analyst Dennis Telzrow boosted his rating after a recent meeting with executives from the company, citing "increased confidence that the new management team has or will have fixed the problems of the past and that the current fiscal year will begin a string of successful earnings gains that document the effectiveness of the new management team."

He raised his price target on the shares to $20 from $18.

Chief Executive Michael Yerington took the reins of Jackson Hewitt in October, and other senior executives were also shifted. In June, the company reported its fiscal fourth-quarter profit fell 13 percent, following a disappointing tax season in which fewer returns were processed. For the full fiscal year, net income fell by more than half.

Telzrow said in a note to clients that a key to any turnaround will be entering the 2009 tax season with an "effective early season product, which the company states it has but for competitive reasons has not identified the particulars."

He also said Jackson Hewitt needs to focus more on improving productivity in its offices, and less on expansion. The company has about 6,800 franchised and company-owned offices throughout the U.S., according to its Web site. "The opportunities in the short run, the next few years, can be more productive in improving the existing store performance rather than growing the store base," Telzrow wrote.

Telzrow, in a telephone interview Wednesday, said he was unconcerned about the stock's decline. "Whether the stock goes up or down in one particular day is irrelevant," he said, stating he stands by his view anticipating a turnaround for the company.