In Line Earnings at Joy Global, Sales Beat

Zacks

Joy Global Inc. (JOY) reported adjusted earnings of $1.11 per share in the fourth quarter of fiscal 2013, compared with $2.10 per share in the year-ago quarter. Earnings came in line with the Zacks Consensus Estimate.

Joy Global’s fiscal 2013 adjusted earnings were $5.83 per share, compared with $7.44 per share in fiscal 2012. Earnings were a cent lower than the Zacks Consensus Estimate of $5.84.

GAAP earnings per share for the fourth quarter were 25 cents and for the fiscal were $4.99 compared with $1.99 and $7.13 respectively in the comparable year-ago period.

Total Revenue

Joy Global reported net sales of $1,181.8 million in the fourth quarter of fiscal 2013 versus $1,594.9 million a year ago, reflecting a year-over-year decline of 25.9%.

The top line was ahead of the Zacks Consensus Estimate of $1,114 million for the fourth quarter.    

Joy Global reported net sales of $5,012.7 million for fiscal 2013 versus $5,660.9 million reported in fiscal 2012, which reflected a decline of 11.5%. With this the company beat the Zacks Consensus Estimate of $4,938 million.

The year-over-year decline in sales was due to lower aftermarket as well as original equipment sales. In addition, unfavorable exchange rates impacted the company’s sales numbers .

Highlights of the Release

Joy Global’s operating profit in the fiscal was $0.8 billion versus $1.2 billion in the year-ago period, reflecting a year-over-year decline of 29.9%. The decrease in operating profit was due to lower sales volumes, an unfavorable product mix, and less favorable manufacturing cost absorption, partially offset by reduced product development, and selling and administrative costs.

Total bookings at Joy Global during the fiscal year were $3.9 billion, down 23% from the previous fiscal year-end level of $5.07 billion. The 17.3% and 28.1% respective decline in orders from Joy Global’s legacy underground and surface businesses led to the overall shortfall.

Total backlog at the end of fiscal fourth quarter was $1.5 billion, reflecting a decline of 25.9% from the comparable year-ago period.

The company continued with its shareholder friendly moves by repurchasing 4.1 million shares worth $214 million. The company still has $786 million remaining in its share repurchase coffer.

Net interest expense in fiscal 2013 was $57.5 million, down from $67.4 million in the previous fiscal. The decline in expenses was primarily due to a lower debt level.

Financial Condition

Cash and cash equivalents of Joy Global as of Oct 25, 2013, were $405.7 million versus $263.9 million as of Oct 26, 2012.

Cash provided by operating activities during fiscal 2012 was $638.5 million versus $463.9 million provided in the previous year.

Capital expenditures were $153 million in fiscal 2013, compared with $242 million in the prior year. The decline was due to the company’s prudent cost management in the wake of declining demand for mining equipment.

Guidance

Joy Global expects revenue to range from $3.6 billion to $3.8 billion for fiscal 2014. The company expects fiscal 2014 earnings per share between $3.00 and $3.50.

The fiscal 2014 guidance is below what it achieved in fiscal 2013. Joy Global is taking a cautious stance going into fiscal 2014. The rationale behind a conservative guidance is that the company is still unsure regarding the timing of demand recovery.

Fiscal 2013 was impacted by a supply glut, which is expected to continue into the first half of fiscal 2014.

Our View

Fiscal 2013 has been another difficult year for Joy Global. Depleting backlogs and decline in 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.

The company’s initiative to move its production capability towards areas which have higher growth potential is appreciable. However, in the present market scenario it will be very difficult to predict a turnaround in demand for mining equipment.

Joy Global currently has Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include H&E Equipment Services Inc. (HEES), Alamo Group, Inc. (ALG) and ABB Ltd. (ABB). All these stocks hold a Zacks Rank #2 (Buy).

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