JOY Global (JOY) Earnings to Miss on Weak Mining Market - Analyst Blog


JOY Global Inc. ( JOY ) will release its fiscal third quarter 2014 financial results before the market bell on Sep 4, 2014. In the prior quarter, this mining equipment maker reported a positive earnings surprise of 8.57%. JOY Global currently has a Zacks Rank #4 (Sell). Let's see how things are shaping up for the company prior to this announcement.

Factors to Consider this Quarter

The frigid winter in the U.S. had created a sudden increase in demand for electricity. The utility operators had to dig into their existing coal stockpiles to produce power. The World Steel Association also predicted a 3.1% increase in global steel usage which implied a possible rise in met coal demand.

Ideally the above scenario should have reinvigorated the prospects of the mining equipment manufacturers. However, in reality, the supply glut of commodities in the global market and lower-than-expected demand from China undermined the overall global mining market.

To add to the woes of the U.S. coal producers, the U.S. Environmental Protection Agency proposed a Clean Power Plan, the primary objective of which is to cut emissions from existing coal-fired power plants by 30% over the 2005 to 2030 time frame. If implemented, the coal miners will be delved a huge blow and so will their equipment makers.

The ongoing softness in the global market impacted JOY Global's Underground Mining Machinery and Surface Mining Equipment sales in the fiscal second quarter. As coal miners are treading very cautiously in the face of waning demand, we hardly see any respite for JOY Global this quarter.

Earnings Whispers

Our proven model conclusively shows that JOY Global is likely to miss earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Zacks ESP:  This is because the Most Accurate estimate stands at 86 cents, in line with the Zacks Consensus Estimate, resulting in 0.00% ESP.

Zacks Rank #4 (Sell): JOY Global's Zacks Rank #4 combined with a 0.00% ESP indicates that the company is going to miss the earnings forecast this quarter. We particularly caution against stocks with a Zacks Rank #4 and 5 going into the earnings season.

Other Stocks to Consider

Here are some companies worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Alcoa Inc. ( AA ) has an earnings ESP of +16.67% and carries a Zacks Rank #2 (Buy).

Coeur Mining, Inc. ( CDE ) has an earnings ESP of +3.45% and carries a Zacks Rank #3 (Hold).

Cloud Peak Energy Inc. ( CLD ) has an earnings ESP of +28.57% and carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AA , CLD , JOY , CDE

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