NEW YORK (TheStreet) -- Shares of Harsco(HSC) - Get Report are surging, up 6.24% to $17.55 in afternoon trading Wednesday after Jefferies upgraded its rating to "buy" from "hold," with its price target raised to $23 from $16.
The firm upgraded Harsco given that steel production and O&G (oil and gas) end-markets improved earlier than expected, helping current core sales growth forecasts, Jefferies noted.
"Savings from Project Orion exceed forecasts, and additional cost restructuring, if initiated, is incremental to margin improvement," Jefferies analysts said.
Capex is expected to moderate improving free cash flow conversion to 100-plus in 2016, Jefferies added.
Harsco is a provider of industrial services and engineered products serving global industries that operates in Harsco Metals & Minerals, Harsco Industrial and Harsco Rail segments.
Separately, TheStreet Ratings team rates HARSCO CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HARSCO CORP (HSC) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 3.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, HSC maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for HARSCO CORP is currently lower than what is desirable, coming in at 28.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.38% trails that of the industry average.
- Net operating cash flow has significantly decreased to $10.47 million or 61.95% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- HSC's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.36%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Machinery industry and the overall market, HARSCO CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: HSC Ratings Report