Shares of Harsco (HSC 3.83%), 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.
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.
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.
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.