) posted adjusted diluted earnings per share of 39 cents from
continuing operations in the third quarter of 2012 compared with
40 cents in the year-earlier quarter and 43 cents in the
second quarter of 2012. The results surpassed the Zacks Consensus
Estimate of 37 cents per share and management's guidance range of
32 cents to 38 cents per share for the quarter.
Revenues in the quarter amounted to $756.8 million, decreasing
approximately by 11.6% year over year and 1.8% sequentially. The
sales in the quarter missed the Zacks Consensus Estimate of $772
million. The company's revenue has declined by $32 million due to
the closing of agreements in the Metals & Minerals segment
and discontinuation of Infrastructure segment's operations in
various countries. The foreign currency translation also reduced
the sales by $41 million in the quarter. The revenue was also
adversely impacted by the weak metals and commercial construction
On a segmental basis, Metals & Minerals generated revenues
of $344.9 million, down nearly by 13.9% from the year earlier
quarter and 5.5% sequentially. The year-over-year drop in the
segment's sales was attributed to the closing of agreements in
the Metals & Minerals segment, foreign currency translation,
low volume owing to the clouded metal market and low
international steel production.
Revenue from the Infrastructure segment was $229.3 million,
down 18.8% from the year-earlier quarter and 2.3% sequentially,
primarily owing to the discontinuation of Harsco's operations in
several countries and foreign currency translation, which has
reduced the segment's sales in the quarter by $16 million and $14
million, respectively. Additionally, the weak commercial
construction markets and soft end-market for industrial
maintenance services in the North America and Europe regions were
also damaging the segment's sales during the quarter.
The Rail segment generated revenues of $91.4 million, up 4.6%
from the year-ago quarter and 14.8% sequentially. The annual hike
was attributable to high equipment delivery in China.
Revenues from the Industrial segment were $91.2 million, up
6.5% year over year but decreased nearly by 0.3% sequentially.
The segment's sales were encouraged by the favorable mix of
air-cooled heat exchangers and mounting market demand in grating
business during the third quarter of 2012.
In terms of a business mix, Service revenues were $571.9
million, down from $682.9 million in the year-earlier
quarter. Product revenues improved to $184.9 million from
$173.0 million in the year-earlier quarter.
Operating margin in the third quarter of 2012 came in at 6.7%
compared to 6% in the year-ago quarter and 4.5% in the previous
quarter. Effective tax rate (restructuring charges excluded)
during the quarter came in at 29% versus 18% in the prior year
Balance Sheet and Cash Flow
Harsco ended the quarter with cash and cash equivalents of
$113.7 million, down from $121.4 million at the end of the
previous quarter. Net trade accounts receivable in the quarter
were $619.4 million compared with $615.2 million in the previous
quarter. As of September 30, 2012, long-term debt was recorded at
$953.6 million, increasing from $949.6 million in the previous
In the third quarter of 2012, net cash provided by operating
activities was recorded at $75.6 million compared with $123.2
million in the prior year quarter.
Management expects earnings per share in the fourth quarter of
2012 to be annually and sequentially low. The earnings per share
from continuing operations (special items excluded) are expected
to be in the range of 28 cents to 33 cents for the fourth quarter
of 2012. Effective tax rate is projected to be around 29% for the
upcoming quarter of 2012.
Management expects that owing to the clouded economic
condition, the steel production would decrease. In the upcoming
fourth quarter of 2012, the weak end markets are likely to
negatively affect the company's Infrastructure segment,
offsetting the positive impact from the company's cost effective
Harsco anticipates that its Rail business will deliver a
strong performance in the coming quarter on the backs of
increased equipment delivery, while the company's Industrial
segment is likely to be adversely affected by decreased order
Headquartered in Pennsylvania, Harsco Corporation is a
diversified, multinational provider of market-leading industrial
services and engineered products. The company should always
remain cautious of its peers in the industry it belongs to. Big
players to take note of in this regard include
The company currently retains a Zacks #4 Rank, which
translates into a short-term 'Sell' rating. We also maintain a
long-term 'Neutral' recommendation on the stock.
HARSCO CORP (HSC): Free Stock Analysis Report
THERMOGENESIS (KOOL): Free Stock Analysis
SPX CORP (SPW): Free Stock Analysis Report
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