Why Shares of Harsco Soared on Thursday
What happened
Shares of Harsco (NYSE: HSC) jumped 17% on Thursday after the industrial manufacturer reported better-than-expected earnings and announced two transactions designed to accelerate the company's move into what it sees as higher-performing sectors.
So what
Harsco on Thursday morning reported first-quarter adjusted earnings of $0.29 per share on revenue of $447 million, surpassing consensus estimates of $0.23 per share in earnings on sales of $443.5 million. Sales increased 10% year over year thanks to growth in Harsco's industrial and rail segments.
The company also announced two deals, a $625 million purchase of specialty recycling firm Clean Earth from Compass Group Diversified Holdings and the sale of its Air-X-Changers business to Chart Industries (NASDAQ: GTLS) for $592 million. Harsco said it expects Clean Earth to generate about $300 million in revenue and $65 million of adjusted EBITDA annually.
Combined, the deals will help to boost Harsco's exposure to environmental services and move the company away from more cyclical, less profitable businesses.
"Five years ago, we recognized the need to enhance our business model and begin adapting our portfolio to generate greater shareholder value," company chairman and CEO Nick Grasberger said in a statement. "These transactions align with our strategy to decrease complexity of the portfolio, focus on less cyclical industries and pursue higher growth businesses with strong margins."
Now what
Harsco also raised its full-year guidance, saying it now expects to earn $1.35 to $1.53 per share instead of $1.29 to $1.47.
Shares of Harsco, despite strong performances, especially when the economy is going well, are basically unchanged over a 5-year period and down 16% over the last 10 years, badly losing to the S&P 500. The company believes these deals, and the change in business mix that will come with them, are a step toward breaking free of the cyclical economy. Investors were applauding the changes on Thursday.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chart Industries. The Motley Fool has a disclosure policy.