Joy Global Incorporation
) reported adjusted earnings of $2.04 per share in the second
quarter of fiscal 2012, compared with $1.52 per share in the
The results of the company were 9 cents ahead of the Zacks
Consensus Estimate of $1.95.
Joy Global reported net sales of $1.54 billion in the relevant
quarter, up 45.0% from $1.06 billion in the year-earlier period.
The growth was driven by higher contribution from
Underground Mining Machinery
(up 36.7%) and
Surface Mining Equipment
(up 57.4%), while eliminations were a marginal drag on total
The increase in shipment of original equipment at Underground
Mining Machinery and Surface Mining Equipment benefited
Backlog at the end of the quarter was $3.1 billion, dipping
sequentially from $3.6 billion at the end the first quarter of
fiscal 2012. Considering the uncertainties in the current US coal
market, the company has lowered the backlog for underground
equipment by $118.7 million.
Net sales in the relevant quarter came in higher than the Zacks
Consensus forecast of $1.45 billion.
Booking in the second quarter dropped 19% over the previous
quarter. Lackluster booking was attributable to a drop in domestic
order and sluggishness in some international pockets. These
negatives were marginally offset by strong order from China and
During the second quarter, cost of sales climbed 49.4% to $1.03
billion from $0.7 billion a year ago.
Selling and administrative expenses rose 28.6% from the previous
year, but declined as a percentage of total revenue by 151 basis
points year over year.
Operating income shot up 31.7% year over year mainly due to
higher sales volume. Besides, contribution from acquired assets
also benefited results.
Interest expenses during the quarter grew by $3 million to $17
million. The increase was attributable to payment of incremental
interest associated with the borrowings for funding the acquisition
of LeTourneau and IMM.
Cash and cash equivalents of Joy Global as of April 27, 2012,
were $390.9 million versus $288.3 million as of October 28,
Cash from operating activities was $110.6 million in the second
quarter of fiscal 2012 versus $256.8 million in the second quarter
of fiscal 2011. The year-over-year decline was due to increase in
Capital expenditure at Joy Global for the second quarter was $65
million, up $40 million from the year-ago quarter. The noticeable
rise in capital spending is part of the company's plans for the
year to increase its global capacity and aftermarket service
Joy Global notes that the strength in the international market
will not be able to offset the softness in US aftermarket demand.
The company expects weakness in the US aftermarket to hit total
revenues by $100 million and reduce earnings per share by 18 cents
in fiscal 2012. The excess accounting charges for the purchase of
IMM are now estimated to be 17 cents per share for the fiscal.
Taking into consideration the above factors, the company
presently forecasts fiscal 2012 revenues in the range of $5.5
billion to $5.7 billion, while earnings per share are expected in
the vicinity of $7.15 to $7.45.
Joy Global competes head to head with the industry behemoth
). Caterpillar's first-quarter adjusted earnings per share
increased 29% year over year to $2.37, ahead of the Zacks Consensus
Estimate of $2.13.
Revenues increased 23% year over year to $15.98 billion,
surpassing the Zacks Consensus Estimate of $15.82 billion. Volumes
grew for both new equipment and aftermarket parts as well as across
all geographic regions except Latin America.
Despite Joy Global's forecast beating results this quarter, we
are cautious about the reduction in backlog as well as order
booking. The decline in U.S. thermal coal demand and the
uncertainties involving the Eurozone debt crisis have affected the
demand for Joy Global's products.
The silver lining for the mining companies is higher production
of steel in the U.S. and China and 90 gigawatts of thermal power
additions in China and India, leading to an increase of 300 million
tons of thermal coal demand.
Despite the imposing presence of Caterpillar, we believe the
market is large enough for Joy Global to benefit from increasing
demand from the emerging markets.
Joy Global currently retains a Zacks #3 Rank (short-term Hold
Mining equipment manufacturer and service provider Joy Global
Inc. is based in Milwaukee, Wisconsin. The company caters to its
global consumers and provides manufacturing, distributing and
servicing equipment for surface mining, through its P&H Mining
Equipment division, underground mining, through its Joy Mining
Machinery division and bulk material conveyor systems, through its
Continental Crushing & Conveying division.
CATERPILLAR INC (CAT): Free Stock Analysis
JOY GLOBAL INC (JOY): Free Stock Analysis
To read this article on Zacks.com click here.