We have maintained our Neutral recommendation on
Joy Global Inc.
) primarily owing to possibilities of lower demand for mining
equipments due to switching to natural gas from coal as raw
material for electricity generation in the U.S. Besides, slow
progress in prevailing European debt crisis, to some extent, may
influence the company's upcoming performance.
As far as Joy Global's key growth indicators are concerned, the
company's prospective long-term fundamentals of the mining
industry will aid in its future growth. In addition, we expect
demand for mining equipments to increase in the near term due to
projected growth in power production in Asia.
In the third quarter of fiscal 2012, Joy Global's results lagged
the Zacks Consensus Estimates, but surpassed the year-ago
numbers. Improvement in year-over-year performance was driven by
higher contribution from the Underground Mining Machinery and
Surface Mining Equipment segments; partially offset by increase
in cost of sales, and selling and administrative expenses.
As far as negative factors are concerned, Joy Global primarily
depends on third-party vendors to fulfill its raw material
requirements. If any of the vendors fail to supply raw materials
on time, the company will not be able to provide equipments or
services to its customers within the stipulated time. This will
negatively impact the company's financial results.
Joy Global believes that there will be a rise in the long-term
industrial demand in the U.S., China and India, triggering
greater requirement for mining equipments going forward for both
after-market and original equipments. To capitalize on this
strong international opportunity, the company recently completed
few significant acquisitions including China-based underground
longwall coal mining equipments provider International Mining
Machinery Holdings Limited ("IMM") and LeTourneau Technologies
We presently prefer Joy Global's peer Illinois-based
) having a short-term Zacks #3 Rank (Hold rating), as the former
currently has short-term Zacks #4 Rank (Sell rating).
Milwaukee, Wisconsin-based Joy Global Inc. caters to its global
consumers and provides manufacturing, distributing and servicing
equipments for surface and underground mining. With a market
capitalization of $6.05 billion, the company has 14,500 full-time
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