On Jan 13, we issued an updated research report on Joy Global Inc. JOY. Joy Global’s cost-saving initiatives, non-core asset sales and the President-elect’s vow to revive the coal industry bode well for the company. However, in the commodity surplus market, miners are not going ahead with new projects, which is hurting Joy Global’s bookings.
Joy Global’s earnings in fourth-quarter fiscal 2016 lagged the Zacks Consensus Estimate, while total revenue beat the same. However, quarterly revenues were down on a year-over-year basis due to lower contributions from the Underground Mining Machinery and Surface Mining Equipment segments.
Even though the global commodity markets are gradually regaining balance, the mining industry is still deferring capital expansion and maintenance work, which is having an adverse impact on the company’s bookings. In the fourth quarter of fiscal 2016, bookings declined 9% year over year to $559 million, while full-year booking tumbled 14% to $2.3 billion. In the fiscal fourth quarter, Underground and Surface Mining Equipment orders were down 21% and 2%, respectively.
On the bright side, the President-elect Donald Trump’s favor for the coal industry might turn the fortunes of mining equipment makers. Trump, during his campaign, vowed to revive the coal industry and incidentally, coal miners contribute nearly 59% to Joy Global’s revenues. It’s quite clear that a turnaround in the coal industry will boost the performance of the mining equipment maker. Other equipment makers like Deere & Company DE and Caterpillar Inc. CAT are also expected to benefit under Trump’s Presidency.
The company’s management has implemented several strategies to optimize its cost structure and realign production capacity to cope with sluggish customer orders. Joy Global is relocating production capacity to low-cost regions and trying to expand operations in other commodity lines to boost its performance.
Joy Global generates a sizeable amount of its top line from its global clients. The political and the economic conditions in the countries and regions in which the company operates may significantly affect its profitability and growth prospects. In addition, negative currency translation is adversely impact the company’s bookings.
Price Movement
Joy Global’s shares inched up 1.01% over the last three months, underperforming the Zacks categorized Manufacturing- Construction and Mining industry’s gain of 9.4%.
The underperformance was mainly primarily due to soft bookings at both Services and Original Equipment product lines.
Zacks Rank & a Key Pick
Joy Global currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same space is H&E Equipment Services, Inc. HEES.
H&E Equipment Services has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. In the last three months, the company’s shares gained 49.5%, outperforming the broader industry.
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