H&R Block Inc. (NYSE: HRB) announced that it swung to a quarterly profit and surpassed analyst estimates. The tax preparer sold off its Option One mortgage servicing business to billionaire Wilbur Ross in April and forecast a full-year profit that was also higher than the market was expecting by a long shot.

Many traders had positioned themselves for poor results earlier this month, sending the stock some 10% lower on June 20th. Specifically, they expressed concerns about the company's guidance, saying the cash-poor households may start doing their own taxes rather than paying H&R Block to do them.

However, many contrarians were able to make a mint from this trade. There have been many economic slowdowns in the past, but professional filing of taxes has tended to be recession resistant. After all, many filers use professional tax preparers in order to access their refunds more quickly than otherwise possible.

Notably, H&R Block even managed to increase its U.S. retail client base by 3.8 percent while its number of international clients grew by 6.1 percent with particularly strong growth in Canada. The company said it was confident that it would realize significant gains in earnings per share through 2011.

In the end, however, it was the value of the dollar that helped the most. More than half of the revenue increase and a third of the profit increases from the international business resulted from favorable exchange rates when compared to the U.S. dollar. However, with continued weakness in the United States, this disparity should continue to grow.

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KB Home (NYSE: KBH) shares dropped after the nation's largest homebuilder announced that its losses widened in the second quarter. Weaker sales and falling home prices led to a 55 percent drop in revenues as the company also booked charges related to the lower value of unsold homes, joint venture deals and land option contracts.

KB Home reported a net loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million during the same time a year ago. Meanwhile, revenues plunged to $639.1 million from $1.41 billion a year ago, driven down by lower housing and land sale revenues.

"Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home," Mezger said in a statement. "But as housing affordability continues to improve, we expect todays hesitant buyers to become a healthy source of demand for new homes, fueling the eventual housing market recovery."

The problem is so large at this point that some rental rates are higher than mortgage rates for like-kind properties! Still, people prefer to pay rent instead in order to avoid paying money on a property that is going to decline in value. This simply emotional fear has been causing a very real decline as inventories continue to rise.

Foreclosures have risen substantially over the past few months, and very few buyers are stepping in to purchase houses on the cheap. This environment of high supply and low demand has forced down prices for simple economic reasons. The problems won't be resolved either until buyers start to step in and purchase inventory.

When will buyers step in? That's the million dollar question for home buyers and companies like KB Home alike...

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Goldman Sachs (NYSE: GS) advised selling shares of the financial services firm Citigroup, which sent shares sharply lower on the day. Goldman cut its recommendation for US Brokers to neutral from attractive and strongly recommended that investors sell shares of Citigroup, citing multiple problems, including more asset write-downs, higher loss provisions for consumer credit and the potential for more capital raises, dividend cuts or asset sales.

Shares of Citigroup fell more than 6% on the news, reaching a brand new 52-week low. Goldman's recommendation marks a sharp reversal from the positive stance that it took following the near collapse of Bear Stearns. The news also comes just days after Goldman Sachs itself was downgraded to market perform by analysts at Wachovia "in light of renewed economic fears" despite being the strongest investment bank in the U.S.

Goldman Sachs cut its second quarter and fully year forecasts for several brokers. The largest cuts were made on Citigroup and Merrill Lynch where it now sees the firms posting losses in both the second quarter and full year. Goldman expects Citigroup to take a $9 billion writedown and Merrill to take a $4.2 billion writedown in the most recent quarter. Both firms are expected to report their second quarter earnings in mid-July.

In the end, the brokers and investment bankers are still in big trouble and face large future writedowns. Goldman Sachs remains one of the few large investment banks that has been faring well against the problems, but even they have seen a downgrade. It will be very interesting to see where things head from here now that the negative sentiment is now out in the open with even analysts beginning to downgrade the sector...

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MBIA Inc. (NYSE: MBI) shares are trading higher on the day in a continued recovery from its recent lows as some investors are beginning to find themselves bullish on the bond insurer. This sentiment is apparent in the price of the July $5 options, which are trading at a high $0.75 per contract. The price implies that some investors are betting that MBIA will rise above $5.75 during the next 23 days before the July options expiration.

Investors who are neutral to bullish may be interested in purchasing a covered call on MBIA to take advantage of this premium. The return on investment for this position would be approximately 15.31% for a 23-day period assuming that the stock doesn't plummet below $4.90 during that time.

Shares of MBIA have plummeted in recent weeks after an analyst from UBS noted that the company could face an additional $6.8 billion to $7.5 billion in losses on its mortgage-backed securities and structured finance portfolio. Brian Meredith noted that these calculations were based on UBS' mortgage research team's cumulative mortgage-securities and credit loss expectations.

Recently, MBIA's credit rating was cut to "AA" from "AAA", which means that the insurer may face difficulty generating new business. After all, who is going to insure their bonds with someone who has a less than perfect credit rating.

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Dow Chemical Company (NYSE: DOW) has raised its prices once again in an effort to counteract rising commodity prices. The move represents the second price hike this month alone while the company also noted that it would trim its capacity for several products and add on new freight surcharges to certain orders.

The move also underscores the problem the Federal Reserve faces as it modifies its interest rate policy to address the rising threat of inflation amid weak economic growth. The Fed has already aggressively cut rates from last September through April, but the result has been a dramatic decline in the value of the dollar.

Dow Chemical also noted that things weren't going to improve anytime soon. The company said it will raise prices as much as 25% starting on July 1st, which would come on top of the up to 20% increase that took effect June 1st and led several others to make similar price adjustments of their own.

The company made its first dramatic move back in December when it announced that it would cut 1,000 jobs and shut a number of underperforming plants in order to put the savings to work in higher-growth opportunities. It also unveiled a joint venture with Kuwait Petroleum, which allowed it to sell a big piece of its less profitable assets by selling a 50% stake for $9.5B.

It appears that for the next few months, consumer prices will continue to rise unless the Fed takes action.

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CME Group Inc. (NYSE: CME) announced plans today for a share buyback and special dividend that effectively sweetens its bid for Nymex Holdings Inc. (NYSE: NMX). The world's largest futures exachange said it would institute a $1.1 billion buyback plan over the next 18 months and pay a $5 per share cash dividend if its bid for the energy and metals exchange succeeds.

The proposed acquisition hit some snags due to a slump in CME Group's share price, which has lowered the takeover price by as much as $3 billion to just $8 billion. The buyback and dividend tactic worked wonders the last time CME Group used it during its acquisition of rival Chicago Board of Trade last year. After all, they are great for shareholders!

The original deal calls for Nymex shareholders to receive $36 and 0.1323 shares of CME for each NMX share. The proposed dividend would raise the purchase price for Nymex stock to $97.11 per share, which represents a $9.27 billion overall valuation. However, some investors are still concerned that the deal may fall through.

Many believe that the CME Group may be forced to tweak the cash portion of the deal slightly higher in order to sway the remaining opposition. This is the cause behind the recent rally in the differential between Nymex and CME Group shares that arbitrageurs have been trading for some time now.

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Winnebago Industries, Inc. (NYSE: WGO) shares fell sharply today after the recreational vehicle maker announced disappointing earnings. The company saw its third quarter profit dive 73% as higher gas prices, tigher consumer credit, and a softer economy drove motor home sales into the ground.

"The motor home market has changed significantly in the past year, with dramatic declines in the past few months," CEO Bob Olson said in a statement. "Discretionary purchases have declined in the United States as the country is faced with unstable fuel prices, consumer confidence at 16-year lows and a tighter credit environment."

Olson also noted that the industry has seen a decrease in motor home sale sof more than 26% for the first four months of this year and a stead decline of more than 30% in both March and April, which are typically stronger months for recreational vehicles. To help combat the declines, the company plane on closing its Charles City factor and restructure itself.

Many investors should have seen this coming with gas prices skyrocketing higher and recreational spending in general on the decline. However, shares in the company still dropped sharply by 5.69%. The stock is already down some 30% so far this year as many expect things to get far worse before they get any better.

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Huntsman Corporation (NYSE: HUN) shares fell sharply today after Hexion Specialty Chemicals said it may not follow through with its promise to purchase the company. Hexion decided not to pursue the purchase amid Huntsman's deteriorating financial condition that has many investors worried. At least one analyst has reduced his target from $28 to $15 per share amid the crisis that has sent shares plummeting.

The move to cancel the merger comes after Huntsman posted an 84 percent drop in first-quarter profits as it saw raw material and feedstock costs soar to record highs as the U.S. dollar weakened further. Sharp increase in raw material costs have been hitting many companies hard that have not hedged their bets. So far this year, Huntsman shares have slipped some 19 percent and they dropped a further 38 percent during today's trading.

Huntsman President and Chief Executive Peter Huntsman said his company would "vigorously enforce" its rights under the original deal and "seek to consummate the merger on the agreed terms". Analysts do not expected a renegotiated deal price at this time, and expect prolonged litigation to add to the uncertainty of the stock. As a result, Huntsman's shares fell sharply on the day.

Huntsman Corporation shares are trading down $8.12, or 38.93%, to $12.74 on the news.

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Goldman Sachs (NYSE: GS) has managed to surprise investors and avoid the credit crisis once more. The Wall Street powerhouse managed to book $2.1 billion in profit, which topped forecasts and sent shares higher. A sharp decline in leveraged loan activity was offset by a surge in equity underwriting as more companies looked to raise money during the quarter. Asset management and securities services also helped to make a spectacular quarter.

The investment bank noted that its net earnings for the second quarter came in at $4.58 per share, which was loser than the $4.93 per share a year ago, but higher than Wall Street's $3.42 per share estimate. Goldman Sachs also reported revenues that were 7.5% lower to $9.42 billion, but that also topped analyst estimates of $8.74 billion. Shares were already some 10% higher on the week but mobed up marginally on the news.

The impressive results came at the heels of a huge los at rival Lehman Brothers (NYSE: LEH) and at a tough time for investment banks in general. Lehman announced a $2.8 billion second-quarter loss while its management tried to calm investors concerned about a Bear Stearns style collapse on the horizon. Meanwhile, Morgan Stanley is expected to see its profit plunge some 60% from a year earlier.

In the end, Goldman Sachs continues to impress analysts and beat other competitors in the investment banking arena. This should also give them an edge in the future as they are able to attract and retain some of the best personnel in the industry thanks to the steep cuts elsewhere. It will be interesting to see where all of these banks are left when the market eventually recovers and they are looking to hire once again...

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Sirius Satellite Radio (NDAQ: SIRI) and XM Satellite Radio Holdings (NDAQ: XMSR) drew one step closer to consummating their planned merger yesterday after a key U.S. regulator expressed support for the 16-month-and-coming deal. FCC Chairman Kevin Martin confirmed published reports that he would support the transaction provided that the companies agreed to a series of conditions.

There had been concern that the merger between the two satellite radio giants would eliminate the possibility of any competition and create a monopoly. As a result, the companies are being forced to agree to a series of conditions including making 24 radio channels available for noncommercial and minority programming. In addition, the companies have to cap prices, provide interoperable radios and offer programming on an a la carte basis.

Martin's decision will likely remove the last remaining regulatory hurdle in one of the most length and heavily criticized decisions in the history of M&A. The Justice Department has already stated that competition from traditional and high-definition radio, iPods and MP3 players already presented a clear competitive environment. As a result, the merger no longer faces any antitrust hurdles.

Shares of both companies rose on the news.

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Yahoo Inc. (NDAQ: YHOO) shares dropped off a cliff today after the search company shunned Microsoft Corporation (NYSE: MSFT) completely in favor of a deal with Google Inc. (NDAQ: GOOG) instead. Management may have finally found a way out of the situation, but shareholders clearly disapproved of the new deal. Shares plummeted nearly 5 percent on the news as a Microsoft deal is now completely out of the picture.

The only hope remaining for some shareholders is Carl Icahn's continued involvement. The activist shareholder had been pushing for a deal with Microsoft and even nominated his own directors to the board in order to effect change. The aging investor isn't known for giving up either, so it should be a fight until the end. Investors don't have to look back too far to see that fact- he had to try twice to effect change in Motorola!

However, the fact remains that most proxy contests end up failing. Moreover, Microsoft has not indicated that it would still be interested in a deal even if Icahn did take over the company. The only thing that is for certain is that the Google deal would be voided if Icahn does win control over the search giant. This fact could put a strain on his popularity with institutional investors as a loss of a Google and Microsoft deal would put Yahoo back to step 1.

In the end, it is no secret that Yahoo needs to change something in order to get itself out of its current lull. Management believes that a partnership with Google would help increase its revenues. Shareholders believe that a sale to Microsoft represents the bet immediate solution. Overall, it looks like Google is the only clear winner as it has now secured a deal with Yahoo while also eliminating any deal with Microsoft that could boost its competition.

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Citigroup Inc. (NYSE: C) chief executive Vikram Pandit announced plans today to shut down Old Lane Partners. This was a hedge fund group that he co-founded and sold to the bank last year for more than $800 million. A regulatory filing showed that the bank took a first-quarter charge of $202 million to write-down the value of its investment in Old Lane, which contributed to its $509 million hedge fund unit loss during the quarter.

Ousted chief executive, Charles Prince, called the transaction "an investment as much as it is an acquisition" last April when the deal was completed. Many saw the deal as a way to recruit Pandit as well as John Havens, who was promoted in March to head of investment banking, trading and hedge funds. It turns out that the deal wasn't a great investment or acquisition as Citigroup took a dive as a result of hedge fund losses.

At least shareholders can be sure they weren't scammed. Pandit may have received $165.2 million last year for his stake in Old Lane, but he reinvested $100.3 million, after tax, into the fund, according to a regulatory filing. This means that he is on the hook for just as much of the losses as many of the other investors. It appears that this was simply a case of poor timing for Citigroup and poor asset investment choices by Old Lane.

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Krispy Kreme Doughnuts (NYSE: KKD) has been beaten up since its heyday and remains 75% off of its 52-week high. However, the troubled company reported strong earnings on Monday that sent its shares substantially higher and gave investors renewed hope for the future. The question is: Is this a real recovery or just a temporary blip on the radar screen before more declines hit the stock?

Krispy Kreme shares spiked nearly 8% yesterday after the company announced first quarter earnings of 6 cents per share compared to a loss of 12 cents per share during the same quarter last year. However,revenue for the first quarter fell 6.6% to $103.6 million, which is down from $110.9 million a year earlier. The decrease was due to a 10.3% drop in company stores revenues and a 2% drop in supply chain sales.

The increase in earnings is only due to a large write-down last year due to the refinancing on some debt. As a result, shareholders should not take this as any kind of major improvement in cost savings or other measures. Rather, the decline in revenues makes its quite clear that the company continues to face significant problems ahead that may erode shareholder value.

Krispy Kreme continues to feel the pressure from the industry slowdown. The chain opened 28 new stores during the first quarter while seven franchises closed. The company said it expects more franchises to close in the future and "the number of such closures may be significant". However, investors again shrugged off these comments and sent the stock higher after the announcement.

The chain also warned against the effects of higher raw material costs. The jump in food prices has led to a sharp increase in costs that the company may have trouble passing on to its consumers without hurting revenues. The result could be further margin pressures that could adversely effect shareholder value. In the end, it could be another couple of quarters before investors see any real signs of improvement for this company.

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Yahoo Inc. (NDAQ: YHOO) is facing more heat today after Carl Icahn sent another letter to the Board of Directors today expressing disappointment in their lack of a response to his concerns. The activist investor's previous letter had demanded that the troubled search company immediately sell itself to Microsoft in order to best serve shareholder interests. It will be interesting to see how Yahoo responds to this letter:

Dear Roy:

After reading Yahoo!'s press release put out on Friday in response to my letter of that morning, I cannot help but wonder if you even read my letter.

Again, Yahoo! keeps repeating misstatements in the hope it will convince its shareholders that these misstatements are valid. I cannot understand why the Yahoo! board feels so strongly about its "poison pill" severance plan and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees? Indeed, Yahoo!'s own compensation advisor called the severance plan "nuts." Is it not true, as the shareholder complaint stated, that Microsoft's CEO earmarked $1.5 billion for employee retention (a benefit you neglected to tell your employees about)? Is it not better to incentivize employees to stay in their jobs than to quit? Instead of just continuing to repeat the mantra that we have made an inaccurate interpretation of your severance plan, why do you refuse to go into detail as to why our interpretation is incorrect? Additionally, a New York paper reported this weekend that "sources close to Microsoft said the severance plan was a 'big issue' when deciding what price they could pay for Yahoo!"

In your press release from Friday, you stated again that I do not have a credible plan for Yahoo! Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo!'s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year -- not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets -- especially in light of the fact that, in my estimation, most of your so-called "plans" over the last few years have been failures. Remember the old adage -- those who live in glass houses should not throw stones. Perhaps most importantly, under my plan, I would ask the Board to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as "Chief Yahoo!" It is extremely important to note that Google hired a great operator as a CEO who helped to transform the Company into a giant at the expense of Yahoo! According to publicly available financial information, while Google's income from operations grew 59% per year over the last two years, Yahoo!'s income from operations shrank 21%. What was the board doing over this period? Where was their great "plan"? I believe a new CEO with operating experience might well have had and might still have a very salutary impact on Yahoo! I ask again what your great "plan" has been over the last few years. Why did you permit Google to leave you in the dust?

I outlined a number of questions in Friday's letter. Why don't you do me the courtesy of answering my questions as I have answered yours?

Sincerely yours, CARL C. ICAHN

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Inspire Pharmaceuticals, Inc. (NDAQ: ISPH) shares jumped more than 50% in early trading after its new drug to treat cystic fibrosis met its primary goal for a Phase III trial. The 352-patient, double-blind, 24-week placebo-controlled study demonstrated statistical significance for its primary efficacy endpoint. Secondary endpoints were also evaluated in the trial, which is great news for the company.

“The data from this Phase 3 trial with denufosol are encouraging for the cystic fibrosis community because it brings us one step closer to a novel treatment that addresses the basic cystic fibrosis defect," said Robert Beall of the Cystic Fibrosis Foundation. "There remains a high unmet medical need in the area of CF treatments and denufosol could be an important addition to the treatment regimen."

The drug, denufosol, was well-tolerated and had a favorable safety profile in the trial. Patient retention rates were high and similar etween treatments groups with approximately 90% of patients completing the 24-week placebo-controlled portion. The incidence of adverse events in the group was comparable to the placebo. As in previous trials, the problems were minor - coughing.

“The results from this trial are exciting because they demonstrate that denufosol’s novel mechanism of action, activation of an alternative chloride channel that is treating the underlying defect, had a clinically-meaningful impact on lung function that progressively increased over time," said Frank Accurso. "The improvement in FEV1 was achieved on top of aggressive use of multiple concomitant medications."

In the end, this announcement definitely makes Inspire Pharmaceuticals a stock worth watching as successful drug candidates often become takeover targets once all the risk is gone. The completion of this Phase III trial means one giant leap forward in this process.

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The nation's largest cellular telephone provider was born today after Verizon Communications (NYSE: VZ) agreed to purchase Alltel for approximately $28.1 billion. The deal will help Verizon's wireless business surpass that of AT&T Wireless to take a strong lead.

The deal also represents one of the quickest flips in history as Alltel's private equity owners just completed buying the company last fall for about $27.5 billion. The result was a fast $600 million profit in just about a year. The consortium had reportedly been sitting on huge debt-related losses and were pushing hard to sell.

Under the terms of the deal, Verizon will acquire the equity of Alltel for $5.9 billion and assume $22.2 billion in debt. The transaction is slated to be completed by the end of the year. The move caught investors by surprise given the fact that it was rejected in the past due to Vodafone's resistance - a parter with Verizon Wireless.

The move also positions Verizon increasingly as a wireless business as opposed to a wireline business and is a logical fit. Both companies share the same cellular technology, CDMA, and Alltel services areas that are not serviced by Verizon. This positive spin helped push shares of Verizon up some five percent on the day.

In the end, this move underscores that the wireless industry is no place for independent telecom providers. It is the giants that thrive in this arena and even private equity funds are starting to realize that they cannot compete. It will be interesting to see how this affects others in the sector.

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Yahoo Inc. (NDAQ: YHOO) has suddenly turned into one of the most active dealmakers in its bid to reduce the pressure from shareholders. A whirlwind of new deals were announced today with advertising partners ranging from Wal-Mart Stores (NYSE: WMT) to CBS Corporation (NYSE: CBS). Meanwhile, the company is desperately trying to strike a deal with Microsoft in leiu of an outright acquisition.

Shareholders like Carl Icahn are still not satisfied and are demanding a sale of the company. Many are not impressed that it took Yahoo this long to "rewrite" the company and turn it around. After all, if management was so confident in the company then why has the stock been stagnant for so long? To many investors, it comes down to a vote of confidence. Management still faces a lot of opposition that could prove difficult to qwell without a sale.

According to many shareholders, Yahoo must overcome a large (and growing) gap with Google in the search market in order to win back investors. And that might take a little longer than most shareholders are willing to wait...

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Yahoo Inc. (NDAQ: YHOO) leaders continue to contradict themselves as shareholders become increasingly fed up. Court documents revealed today that Yahoo had rebuffed a partnership with Google Inc. (NDAQ: GOOG) just one day before Microsoft Corporation's (NDAQ: MSFT) bid on anti-trust concerns.

"We are focused on long-term value creation rather than short-term gains," read a statement prepared for Yahoo executives. "Short-term analysis of the revenue for potential of outsourcing monetization may not take into account the longer term impact on the competitive market if search becomes an effective monopoly."

These comments come in sharp contrast to Yahoo's later position, during Microsoft talks, that it was conducting a test with rival Google to sell its search ads. The 180 was part of a strategy by Yahoo to seek alternatives for its business rather than selling out at Microsoft's $31 per share offer.

Now, shareholders are increasingly wondering whether or not Yahoo executives were honestly ever considering the Microsoft offer, or whether they simply will not sell out at any price. The news also comes just after several lawsuits aimed at pushing the transaction through by law or overtaking the board.

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Wachovia Crop.’s (NYSE: WB) poor results combined with the ouster of CEO Ken Thompson is fueling speculation that the firm could be for sale very soon, with analysts tagging JP Morgan Chase & Co. (NYSE: JPM) as the most likely suitor.

Charlotte-based Wachovia is facing some major trouble due to its mortgage market exposure, largely a result of its ill-timed 2006 acquisition of specialty ARM lender Golden West Financial Corp. Though the deal was designed to expand Wachovia into more of the West, its real result was Wachovia buying a huge amount of mortgages at the peak of the housing market. Even Thompson eventually admitted the purchase of Golden West was a bad move given its timing – though by citing only the timing, Thompson seems to ignore the underlying risk of the mortgage debt even without the “mortgage meltdown.”

In the wake of the acquisition, Wachovia has cut its dividend by 41% while being forced to dilute equity by issuing $8 billion worth of new shares.

Several analysts, including those at Merrill Lynch and Deutsche Bank, see JP Morgan as having an interest in buying the faltering bank because Wachovia has a strong presence in the Southeast – an area JP Morgan CEO James Dimon has expressed an interest expanding in.

Even so, there have been no known material talks of a sale by anyone at Wachovia with anyone at JP Morgan, leaving some analysts saying a deal remains unlikely – at least for now.

Regardless of a sale, expect more executive heads to roll at Wachovia – which, given the stock’s performance, seems a long-time coming.

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