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Harsco Beats on Earnings, Lags Rev

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Harsco Corporation (HSC - Free Report) , a diversified industrial company, posted GAAP earnings per share (EPS) of 9 cents in the first quarter of 2013 versus a loss of 36 cents in the year-ago quarter. Adjusted EPS was 9 cents in the quarter compared with 7 cents in the year-ago quarter. The quarterly adjusted EPS beat the Zacks Consensus Estimate of 6 cents.


Revenues in the reported quarter were $715.4 million versus $752.3 million in the year-ago quarter. The quarterly revenues missed the Zacks Consensus Estimate of $721 million. The year-over-year decline in revenue was due to the termination of underperforming agreements in the Metals & Minerals segment and the discontinuation of the Infrastructure segment’s underperforming operations in some countries. Foreign currency translation also reduced sales in the reported quarter.

On a segmental basis, Metals & Minerals generated revenues of $337 million, down 6.4% from the year-earlier quarter. The year-over-year decline was driven by the closure of certain underperforming contracts, negative foreign currency translation and lower steel production volumes, which were partially offset by new contracts.

Revenues from the Infrastructure segment came in at $216 million, down 9.2% from the year-earlier quarter, primarily driven by negative foreign currency translation and lower industrial maintenance activity in Europe, which were partially offset by improved equipment rental activity.

The Rail segment generated revenues of $72 million, up 5% from the year-ago quarter.

Revenues from the Industrial segment were $90 million, up 5% year over year, driven by overall product mix, as well as improved demand for industrial boilers and air-cooled heat exchangers.

In terms of business mix, Service revenues were $551.1 million versus $598.7 million in the year-earlier quarter.  Product revenues improved to $164.2 million from $153.6 million in the year-earlier quarter.


GAAP operating income was $26 million in the reported quarter versus an operating loss of $13 million in the year-ago quarter.  Operating income margin increased 30 basis points to 3.6%.

Balance Sheet and Cash Flow

Harsco exited the reported quarter with cash and cash equivalents of $ 92.9 million, and long-term debt of over $1 billion.

Net cash provided by operating activities was $3.4 million. During the reported quarter, free cash flow aggregated ($38) million compared with ($30) million in the year-ago period.


Management expects EPS from continuing operations to range from 30 cents to 35 cents per share in the second quarter of 2013.

Metals & Minerals' revenues in the second quarter are expected to be moderately lower than the prior-year quarter. Management believes that the uncertain economic conditions will lead to lower steel production going forward. Harsco expects the Rail business to witness better operating performance sequentially on the back of favorable equipment delivery. However, the company’s Industrial segment revenue will likely be moderate and Infrastructure revenues are likely to be in line with the year-ago quarter.

Harsco currently has a Zacks Rank #5 (Strong Sell). Other stocks that look promising and are worth considering in the industry are W.W. Grainger, Inc. (GWW - Free Report) , Posco and Ternium  S. A (TX - Free Report) , each carrying a Zacks Rank #2 (Buy).

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