On May 15, we reiterated our Neutral recommendation on Joy Global Inc. ( JOY ), the manufacturer of mining equipment used in various types of mining. The company currently has a Zacks Rank #4 (Sell).
Why the Reiteration?
Joy Global started fiscal 2013 on a positive note, with adjusted earnings of $1.31 per share in the first quarter of fiscal 2013 beating the year-ago number by 4% and the Zacks Consensus Estimate by 14.9%. Revenues increased 1.2% from the year-ago period to $1.13 billion, and was also ahead of the Zacks Consensus Estimate of $1.08 billion.
However, Joy Global continues to face the rippling effect of the sluggish 2012 market conditions, with its booking in the reported quarter declining from the comparable prior-year period.
On the positive side, global steel and coal production is on an uptrend with a similar trend observed in the copper markets. These macro factors can influence growth at Joy Global. Particularly rising demand for coal in China and India is expected to improve the fortunes of this mining equipment manufacturer.
However, the slowly declining coal stockpiles, continued Eurozone debt crisis and the decline in booking make us skeptical of any quick recovery from 2012 levels. In addition, dependence on a limited group of customers for bulk sales could affect the profitability of the company if it loses any of its prime customers.
Intense competition in the mining industry, consistent expenditure in research & development to match its peers in the technology game and inherent risk of failing to meet customer demand could undermine the positive catalysts of the company.
Other Company Release
In the latest quarterly release, Caterpillar Inc. ( CAT ) and Manitowoc Company, Inc. ( MTW ) missed the Zacks Consensus Estimate by 2.24% and 35.71%, respectively. However, H&E Equipment Services Inc. 's ( HEES ) earnings were 7.7% ahead of our expectation.