Joy Global Incorporation
) reported adjusted earnings of $1.26 per share in the first
quarter of fiscal 2012, compared with 99 cents per share in the
year-ago quarter. The results of the company were a dime short of
the Zacks Consensus expectation.
GAAP earnings per share in the quarter were $1.33 versus 96
cents in the first quarter of fiscal 2011.
Joy Global reported net sales of $1,136.2 million in the
relevant quarter, up 30.7% from $869.5 million in the year-earlier
period. The growth was driven by higher contribution from
Underground Mining Machinery
(up 25.1%) and
Surface Mining Equipment
(up 38.1%), while eliminations were a marginal drag on total
The net sales from the Underground Mining Machinery increased
23% year over year excluding the impact of International Mining
Machinery (IMM), as the demand was driven by international demand.
Similarly, net sales at the Surface Mining Equipment excluding
LeTourneau, increased 18% year over year, driven by aftermarket as
well as well Original Equipment Revenues.
Net sales in the relevant quarter came in lower than the Zacks
Consensus forecast of $1,153 million.
Booking in the first quarter of fiscal 2011 rose a sharp 16.8%
over the previous quarter. The order book was strong for both the
company's original equipment and aftermarket businesses. The
increase in demand, particularly for aftermarket services, is an
encouraging sign implying that customers are steeping up production
to meet growing demand.
During the first quarter of fiscal 2012, cost of sales climbed
32.2% to $772.8 million from $584.1 million a year ago. Similarly,
selling and administrative expenses rose 29.7% from the previous
Despite year-over-year growth in costs, the operating income
increased 39.0% year over year mainly due to higher sales volume
and positive price realization on improved overhead absorption.
Interest expenses during the quarter were $16 million, a
four-fold increase over the prior-year quarter. The hike in
interest expenses was primarily due to increased borrowings of the
company needed to fund the acquisition of LeTourneau and IMM.
Cash and cash equivalents of Joy Global as of January 27, 2012,
were $283.2 million versus $288.3 million as of January 28,
Cash used in operating activities was $14.14 million in the
first quarter of fiscal 2012 versus $6.97 million in the first
quarter of fiscal 2011. The year-over-year increase in usage was
due to increase in payments and change in inventories.
Capital expenditure at Joy Global for the first quarter was $49
million, versus $28 million spent in the year-ago quarter. The
noticeable rise in capital spending was due to the company's plans
for the year to increase its global capacity and cater to
increasing demands in the key growth markets.
Joy Global expects an increase in demand for mining equipment
and aftermarket services as its customers increase their production
levels and add to their mine expansion plans.
With the addition of IMM in its portfolio the company now
expects its total revenue for 2012 to be in the range of $5.6
billion to $5.8 billion and earnings per share to be in the range
of $7.40 to $7.80.
Joy Global competes head-to-head with the industry behemoth
). Caterpillar's fourth-quarter 2011 adjusted EPS was $2.25 versus
$1.47 in previous year quarter. The profit far exceeded the Zacks
Consensus Estimate of $1.73 per share.
Caterpillar recorded an impressive 88% rise in profits to $7.79
per share in 2011 from $4.15 per share in the previous year due to
record sales, excluding the impact of acquisition of Bucyrus. This
compared favorably with the Zacks Consensus Estimate of $6.80 per
Even though the company failed to surpass our expectation for
revenue and earnings per share, the future prospects of the company
look quite positive. The 15% year over year increase of capital
expenditure by the international mining customers should boost
prospects of the company.
The growth for mining equipments will be driven by increasing
demand from China, Australia, Russia, South America and Africa. We
believe the ongoing increase in demand for coal, copper and iron
ore in a global scale will lead to increasing mining and hence
drive the demand for mining equipments.
The company ended the first quarter of fiscal 2012 with a
backlog of $3.6 billion versus $3.3 billion at the beginning of the
fiscal 2012. It is encouraging to note that the backlog has
grown for both Underground Mining and Surface Mining equipment
suggesting all round growth in the mining sector.
Despite the competitive presence of Caterpillar, we believe the
market is large enough for Joy Global to benefit from increasing
demands from emerging markets.
Joy Global currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating.
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
CATERPILLAR INC (
): Free Stock Analysis Report
JOY GLOBAL INC (
): Free Stock Analysis Report
To read this article on Zacks.com click here.