What: The shares of industrial services and engineered products provider Harsco (HSC 6.50%) were up 11% at 3:00 p.m. EDT on Thursday. Driving the rally was the release of a preliminary look at its second-quarter results, as well as its outlook for the balance of the year.
So what: Harsco said that it expects its adjusted operating income to be $41 million for the second quarter, which is well above its guidance range of $22 million to $27 million. Driving this expectation-beating result was the company's metals and minerals segment, which is benefiting from the internal progress the company made to strengthen its performance, as well as improving market conditions.
Because of these improvements, the company expects that its full-year results will be $20 million above its adjusted operating-income guidance range of $80 million to $100 million. Further, it sees improvements in the steel and energy markets driving better results as those markets recover.
The steel market, in particular, is starting to show tangible signs of improvement. Leading global steelmaker ArcelorMittal (MT 4.11%), for example, recently projected that global steel consumption would rise by as much as 0.5% when compared to 2015. Because of this, ArcelorMittal's CEO, Lakshmi Mittal, said that the company expected "improved results in the coming quarters." This improving steel market should also benefit Harsco.
Harsco did have some bad news: The company recorded a loss provision of $40 million related to its railway-maintenance contracts in Switzerland. This loss was due to increased vendor costs, increased estimates for commissioning, and other factors. As a result, the company expects that its second-quarter GAAP operating income will be $1 million.
Now what: Harsco is finally giving its investors some good news. The company got the year off to a terrible start after its business segments came under pressure, which forced it to suspend its dividend to preserve cash. However, through a combination of internal improvements and a rebound in external markets, the company sees better days ahead.