Improving Demand and Portfolio Enhancement Supports Harsco Shares

Harsco Corporation

Harsco Corporation (NYSE:HSC) shares rose 22% after topping revenue and earnings estimates for the fourth quarter. The company’s strategy of enhancing its product portfolio along with improving customer experience and reducing cost structure led it to exceed analysts’ estimates.  

HSC stock trades around $20 following today’s growth of 22%. The sock has the 52-week trading range of $11.40 – $22.00. Harsco shares are trading around 58 times to earnings and 8 times to book ratio, higher from the industry average of 23 times and 3.23 times, respectively.

Solid Q4 Results Enhances Investors Confidence In Harsco Corporation

Harsco has beaten analyst’s consensus revenue estimate for the fourth quarter by $40 million, while earnings exceeded analysts’ expectations by $0.06 per share. The company generated revenue of $455 million in the fourth quarter, substantially higher by 26% from the past year quarter.

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Its metal and mineral segments, which accounted for almost half of the revenue, rose 6% compared to the Q4 of 2016. Higher steel output and service levels were the key drivers for substantial growth in Q4.

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Harsco’s industrial segments posted revenue growth of 46% to $82 million, supported by strong demand within each of the three product businesses. Moreover, higher equipment sales grew its rail segment revenue to $123 million from $70 million in the same period last year.

Overall, higher revenues and improved margins allowed the company to post operating income from continuing operation of $46 million in the fourth quarter.

The CEO said: Execution of our strategic objectives along with positive market momentum led to a very successful year for Harsco.  We exceeded the operating targets established at the beginning of the year, with positive contributions from each operating business.

Future Fundamentals Strengthened

Argus has increased Harsco target price to $21 with a buy rating. The firm has expressed strong confidence in its cost-cutting initiatives, improving end-market demand and strong returns on prior investments.

Harsco’s cash position increased considerably last year, supported by strong growth in earnings. The company generated operating cash flow of $94 Million in Q4, while free cash flows were hovering around $63 Million. Improving cash position and strong demand from end-markets strengthens its future fundamentals.

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