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Why Harsco Stock Plunged as Much as 33% Today

What happened
Shares of Harsco (NYSE: HSC), which helps industrial companies deal with their waste, fell dramatically on May 3, at one point losing as much as 33% of their value. That drop didn’t stick, but the stock was still lower by around 20% at roughly 2:30 p.m. ET. The big driver here was the company’s first-quarter 2022 earnings update. Investors did not like the news.
So what
First-quarter 2022 revenue totaled $453 million, up slightly from the $447 million Harsco earned in the year-ago period. The tally was roughly in line with Wall Street expectations. Management noted continued solid demand for the company’s environmental services and a roughly $7 million headwind from currency fluctuations. Still, the top line wasn’t a huge sign of strength.
Image source: Getty Images.

The story gets far more troubling when you look at the bottom line. Harsco’s first-quarter adjusted loss came in at $0.01 per share, down from an adjusted profit of $0.11 in the same quarter of 2021. Analysts were calling for a profit of $0.03 per share. Although the actual numbers here are small, percentage-wise that’s a very big miss. And, on top of that, the company lowered its guidance for the full year, with adjusted earnings now expected to fall between $0.35 and $0.44 per share compared to the previous guidance range of $0.50 to $0.66 per share. That’s a notable change in what most investors would consider the wrong direction; it’s no wonder the shares sold off so hard.
Now what
The underlying story here isn’t exactly shocking and is summed up in a single sentence from the earnings report: “The Company has updated its 2022 guidance to reflect heightened inflation challenges, related to transportation and container costs, as well as ongoing labor-market tightness.” These are inflationary trends that are top of mind for investors and that don’t look likely to change materially for the better in the near term. So, from a big-picture perspective, it isn’t unreasonable that investors would also be reevaluating their outlooks for Harsco in a materially negative direction.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

What happened

Shares of Harsco (NYSE: HSC), which helps industrial companies deal with their waste, fell dramatically on May 3, at one point losing as much as 33% of their value. That drop didn’t stick, but the stock was still lower by around 20% at roughly 2:30 p.m. ET. The big driver here was the company’s first-quarter 2022 earnings update. Investors did not like the news.

So what

First-quarter 2022 revenue totaled $453 million, up slightly from the $447 million Harsco earned in the year-ago period. The tally was roughly in line with Wall Street expectations. Management noted continued solid demand for the company’s environmental services and a roughly $7 million headwind from currency fluctuations. Still, the top line wasn’t a huge sign of strength.

Image source: Getty Images.

The story gets far more troubling when you look at the bottom line. Harsco’s first-quarter adjusted loss came in at $0.01 per share, down from an adjusted profit of $0.11 in the same quarter of 2021. Analysts were calling for a profit of $0.03 per share. Although the actual numbers here are small, percentage-wise that’s a very big miss. And, on top of that, the company lowered its guidance for the full year, with adjusted earnings now expected to fall between $0.35 and $0.44 per share compared to the previous guidance range of $0.50 to $0.66 per share. That’s a notable change in what most investors would consider the wrong direction; it’s no wonder the shares sold off so hard.

Now what

The underlying story here isn’t exactly shocking and is summed up in a single sentence from the earnings report: “The Company has updated its 2022 guidance to reflect heightened inflation challenges, related to transportation and container costs, as well as ongoing labor-market tightness.” These are inflationary trends that are top of mind for investors and that don’t look likely to change materially for the better in the near term. So, from a big-picture perspective, it isn’t unreasonable that investors would also be reevaluating their outlooks for Harsco in a materially negative direction.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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