On Dec 27, we maintained our Neutral recommendation on the
mining equipment maker
Joy Global, Inc
Why the Reiteration?
Fiscal 2013 has been another difficult year for Joy Global.
Depleting backlogs and declining orders from some of the key
markets pulled back results. Even though the company surpassed
our sales expectation, the decline in yearly bookings and total
backlog is our major concern. Total bookings at Joy Global during
fiscal year 2013 were $3.9 billion, down 23% from $5.07 billion
at the end of the prior fiscal.
To overcome the slackness in demand and the present supply
surplus, the company tried to restructure its operations, move
its production capability to high-growth areas and lower
operating expenses. Joy Global will continue with these
cost-saving initiatives in the current fiscal in a drive to boost
Consolidation in the mining industry has changed the equipment
preference of Joy Global's customers. It also means that the
company will receive orders from fewer customers. In addition,
the mining industry is competitive, inducing Joy Global to
manufacture products catering to customer demand to fend off
The revenue generation of the company is to a large extent tied
to coal market demand. Nearly 62% of the total revenue of the
company is generated from coal-mining customers. Stringent
government regulation and growing awareness regarding the
pitfalls of excessive coal usage are gradually lowering the
demand for thermal coal in the U.S. The decline in coal demand
and consequently in mining machineries can impact the sales
volume of the company.
Other Stocks to Consider
Joy Global currently has a Zacks Rank #5 (Strong Sell).
Better-ranked stocks in the sector include
H&E Equipment Services Inc
Alamo Group, Inc
). All these companies carry a Zacks Rank #2 (Buy).
ALAMO GROUP INC (ALG): Free Stock Analysis
H&E EQUIP SVCS (HEES): Free Stock Analysis
JOY GLOBAL INC (JOY): Free Stock Analysis
TEREX CORP (TEX): Free Stock Analysis Report
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