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Joy Global Beats Earnings, Lags Y/Y

Zacks Equity Research

Joy Global Inc. (JOY) reported adjusted earnings of $1.73 per share in the second quarter of fiscal 2013, compared with $2.23 per share in the year-ago quarter.

Earnings were however 11.6% higher than the Zacks Consensus Estimate of $1.55.

Total Revenue

Joy Global reported net sales of $1.36 billion in the relevant quarter, down 11.7% from $1.54 billion in the year-earlier period. The decline was primarily due to lower contribution from Underground Mining Machinery (down 23.1%), offset marginally by Surface Mining Equipment (up 3.0%).

The performance at Underground Mining Machinery was down due to a 33% decline in original equipment sales and a 13% aftermarket sales decline. The softness in demand from U.S. markets and lower shipments in China and Eurasia led to lower original equipment sales.

Backlog at the end of the quarter was $2.2 billion, dipping sequentially from $2.4 billion at the end the first quarter of fiscal 2013.

Net sales in the reported quarter came in higher than the Zacks Consensus forecast of $1.27 billion.

Quarter Highlights

Booking in the second quarter dropped 8.3% over the previous quarter. Lackluster booking of surface mining equipment impacted results. The sluggishness in booking in North America and Australia resulted in the decline. These negatives were marginally offset by strong order from China and Africa.

During the second quarter, cost of sales declined 11.8% to $0.9 billion from $1.03 billion a year ago. Selling and administrative expenses declined 5.1% year over year.

Interest expenses during the quarter declined by $2 million to $15.1 million.

Financial Update

Cash and cash equivalents as of Apr 26, 2013, were $234.9 million versus $263.8 million as of Oct 26, 2012.

Long-term debt as of Apr 26, 2013, was $1.3 billion, increasing marginally from the year-end figure.

Cash from continuing operations was $1 million in the second quarter of fiscal 2013, compared with $111 million in the prior-year quarter. The decrease in cash was primarily due to income tax payments, an increase in accounts receivable and a reduction in advance payments resulting from a decline in original equipment order activity.

Capital expenditure at Joy Global for the second quarter was $32 million, down from $65 million in the year-ago quarter. Despite the reduction in capex, the company’s objective remains unaltered. The company continues to focus on improving manufacturing capacity in the emerging markets and global aftermarket service infrastructure.


The lingering economic problems in the Euro-zone and the sluggish pace of economic recovery in China continue to impede the growth of global commodity demand. Joy Global notes that the improvement in the global economy is yet to benefit the industrial sector, which drives demand for mining equipment. The softness in demand has resulted in lower bookings.

Taking into consideration the above factors, the company presently forecasts fiscal 2013 revenues in the range of $4.9 billion to $5.0 billion, down from the previous range of $4.9 billion to $5.2 billion.

The reported earnings of the company is are expected to be to be between $5.60 and $5.80, down from the previous guidance of $5.75 to $6.35. Excluding restructuring charges, earnings per diluted share are expected to be between $5.75 and $5.95.

Other Company Releases

Astec Industries Inc. (ASTE) reported earnings of 57 cents per share in the first quarter of 2013, beating the Zacks Consensus Estimate of 53 cents by 7.55%.

Caterpillar Inc. (CAT) announced first-quarter 2013 operating earnings of $1.31 per share, lagging the Zacks Consensus Estimate of $1.34 by 2.24%.

Our View

Despite Joy Global’s forecast beating results this quarter, we are cautious about the decline in backlog as well as order booking. The lower-than-expected recovery in the Chinese market diluted demand. Coal imports in India are expected to reach 165 million tones, exceeding prior-year imports by 30 million tones, a definite positive for mining companies.

On the whole, commodities mined are presently in supply surplus. Hence, the miners are taking a cautious approach towards developing and expanding their mining projects. Unless demand recovers to cover up the excess capacity the mining equipment makers will find it difficult to accelerate demand for mining equipment.

Joy Global currently has a Zacks Rank #5 (Strong Sell). We, however, prefer another operator H&E Equipment Services Inc. (HEES) having a Zacks Rank #2 (Buy).

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