Joy (Global) to the World!

Shareholders of mining equipment maker Joy Global (Nasdaq: JOYG  ) are finding some nice presents under the tree this year, and if Congress behaves itself, the holiday cheer could continue a few more years.

Joy's operating income for the fiscal fourth quarter rose nearly 12% to $147.5 million on net sales of $735.9 million. Operating results would have been even better except for some needed investment related to infrastructure development in China and higher product development costs. These costs partially offset an impressive 200-basis-point improvement in gross margins, which came in at 33.4%.

Net income, however, fell 18% to $69.6 million for the quarter, largely due to tax adjustments. These adjustments, combined with some favorable tax adjustments in the previous year, contributed to a full-year net income decline of nearly 33%, to $279.8 million. On a per-share basis, income dropped from $0.71 to $0.64 for the quarter, and from $3.42 to $2.54 for the year. The market pushed shares up about 7% yesterday, and pulled archrival Bucyrus International (Nasdaq: BUCY  ) along for a 4% ride, as well.

It must have been the big shiny package labeled "outlook" that caught the eye of investors. Joy Global's business consists mostly of selling gigantic equipment -- electric shovels, 4,000-ton draglines, huge drills, and big "longwall" systems -- used to mine coal, both underground and in open pits. Some equipment sales go to miners of copper, oil sands, and iron ore, but it's mostly coal.

The good news is that international markets for both thermal coal used to fire power plants and metallurgical coal used to make steel have been strong. The U.S. market has lately been a little soft, but it now appears this market is firming up.

A little further out, Joy estimates that additional power plant capacity will come online by 2012, boosting coal demand in the U.S. by 100 million tons. That's about 1.5 times the total production of CONSOL Energy, the fifth-largest coal producer in the U.S.

Beyond that, "regulatory uncertainties," as the company put it, could put a damper on future holiday seasons. In other words, Congress and state regulators could impose rules to combat emissions of carbon dioxide, and this could make new coal-fed plants less economically appealing for power generators and utilities like Duke Energy (NYSE: DUK  ) , Southern Company (NYSE: SO  ) , and Allegheny Energy (NYSE: AYE  ) .

Congress' recent decision not to require utilities to get 15% of their energy from renewable sources provides some reason for hope. Failing that, the outlook for international coal is likely to remain strong for years to come.

Any company that depends on coal prices and production will probably always be cyclical, but if you can stand the bumpiness, now might be a good time to take a closer look at Joy Global or Bucyrus. Or better yet, both.

Related Foolishness:

As Foolanthropy enters its second decade, join us in working to bring financial education to the world's children. Learn more about Foolanthropy's new direction.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 557168, ~/Articles/ArticleHandler.aspx, 10/24/2016 3:02:04 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,230.46 84.75 0.47%
S&P 500 2,150.60 9.44 0.44%
NASD 5,304.61 47.21 0.90%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 2:43 PM
JOY $27.89 Down +0.00 +0.00%
Joy Global CAPS Rating: ****
AYE.DL2 $0.00 Down +0.00 +0.00%
Allegheny Energy,… CAPS Rating: ****
BUCY.DL $92.00 Down +0.00 +0.00%
Bucyrus Internatio… CAPS Rating: *****
DUK $78.22 Up +0.20 +0.26%
Duke Energy CAPS Rating: ***
SO $50.82 Up +0.29 +0.57%
Southern Company CAPS Rating: ***