Harsco's Paddling Hard, But The Currents Are Unforgiving

It has been a while since I've written on Harsco (NYSE:HSC), as I wasn't all that interested in the company's seemingly endless attempt to turn itself around while under the shadow of significant debt, ongoing overcapacity in global steel and weak conditions in its core markets, and the ongoing slide in the energy sector. With that, the shares are about a third lower than when I wrote that last piece, though the point of "peak pain" saw a roughly 75% move down.

Management at Harsco deserves some credit. Project Orion has made the Metals and Minerals business better, with a lower cost structure and a more aggressive approach to maximizing value. Alas, I do worry that this is a little like painting flames on the side of a mobility scooter - the business is better, but it is still serving an industry that is going to struggle to grow. What's more, the Rail business that was supposed to be the source of strength has had its own ups and downs and the Industrial business remains exposed to weak energy markets.

If a lot of things go right for Harsco, I can see a fair value in the $16 to $18 range as being valid, but that's going to require ongoing improvement (and no backsliding) in the M&M business, good execution in rail, and an energy recovery. In my base-case, though, the shares look more fairly valued. Harsco has done what it can to be better, but sometimes that's just not quite enough.

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Harsco's Paddling Hard, But The Currents Are Unforgiving