Why Joy Global Surged despite Mounting Losses in 1Q16
Why Joy Global Surged despite Mounting Losses in 1Q16
Market reaction to Joy Global’s 1Q16 earnings
Joy Global (JOY) announced its 1Q16 results (the November–January quarter) on March 3, 2016, before market hours, sending JOY shares up in early trading. The stock closed up nearly 24.3% from the opening price of $12.90.
On a yearly basis until March 4, 2016, JOY declined 58% against a 22% fall for the Energy Select Sector SPDR ETF (XLE). On a year-to-date basis, JOY was up by 40%.
Joy Global’s 1Q16 earnings at a glance
On a quarterly basis, JOY’s adjusted loss per share stood at $0.23, 91.6% above the consensus of $0.12. During the same quarter last year, its EPS was $0.29.
Joy Global’s 1Q16 EPS was unfavorably impacted due to subdued mining activities on the back of continued weakness in commodity prices. The company’s order inflow is adversely impacted, particularly in the US coal and copper markets.
Silver lining to Joy Global’s 1Q16 results
Joy Global’s management is proud that even in such difficult conditions, it was successful in aggressively reducing costs. The company’s management also controlled its capital expenditure as well as its trade working capital. Cash from operations for 1Q16 stood at $109 million.
The order backlog as of 1Q16 ended January 31, 2016, increased to $897 million, up by 2.7% from $873 million at the end of 4Q15. The backlog has been declining in the last few quarters, and it has shown marginal improvement on a quarterly basis.
Caterpillar (CAT), Terex (TEX), and Komatsu (KMTUY) are some of the major companies in the mining equipment industry. CAT’s 4Q15 revenues from the Machinery and Energy segment declined by 24% on a yearly basis. TEX’s 4Q15 revenues also declined by 12% on yearly basis.
JOY is a part of the SmallCap Earnings ETF (EES) and accounts for 0.7% of the fund’s total holdings. Investors in this ETF could benefit if JOY surpasses its operational targets set for 2016.
Browse this series on Market Realist:
