What happened

Shares of Horizon Global (NYSE:HZN), a leading provider of towing and trailering equipment, jumped 12% as of 10:40 a.m. EDT Tuesday. The big move comes in response to the release of mixed second-quarter results.

So what

Here's a review of the headline numbers from the quarter:

  • Sales declined 8% to $233 million. The big reduction was mostly caused by a slower-than-expected ramp of the company's new distribution center in Edgerton, Kansas, which is part of the greater Kansas City area. Results were also weak in Europe. While disappointing, this figure was at the high end of management's guidance range that was announced in mid-July after the company expanded its credit facility by $50 million. However, this result was a bit shy of the $239 million in revenue that Wall Street has estimated.
  • The company recorded another goodwill impairment charge against its Europe-Africa segment. The total charge during the period was $55.7 million.
  • Adjusted earnings per share dropped 57% to $0.36. While this number isn't good in absolute terms, it was much better than the $0.21 in adjusted earnings per share that market watchers had estimated.
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Looking past the headlines, a number of important non-financial events also happened during the period:

  • Longtime CEO Mark Zeffiro resigned from his role in May. Carl Bizon is currently serving as Interim CEO while the board searches for a replacement.
  • The acquisition of Brink has been canceled. 
  • Two facilities in the U.S. were closed.
  • The U.S. salaried workforce was reduced by 30%.
  • Management reaffirmed their commitment to delivering against their stated turnaround plan. As a reminder, that plan calls for $3 million to $5 million in consolidated cost savings this year and $10 million to $12 million on a full-year run rate basis.

In spite of the weak year-over-year comparisons, Wall Street cheered the better-than-expected adjusted profit and commitment from management to right the ship. 

Now what

Horizon's stock had fallen by more than 50% year to date as of Monday, so you could argue that the company was due for a small rally based on any good news.  

Short-term price movements aside, the biggest question for investors is whether or not they believe the company can successfully address all of its problems and return to consistent profitability. With sales, margins, and profits all trending in the wrong direction -- not to mention the sudden exodus of the company's CEO -- I have my doubts that this company will be able to thrive in the long term.

There's an argument to be made that Horizon Global's stock is currently cheap enough to justify the risk, but I'm not a fan of investing in turnaround situations. That's why my plan remains to root for this company's turnaround from the safety of the sidelines and keep my capital invested in the strongest companies I can find.

Brian Feroldi 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.