Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



What to Expect From Joy Global's Earnings Next Week

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Mining equipment giant Joy Global (NYSE: JOY  ) is set to report its second-quarter numbers next week at a time when miners are getting increasingly cautious. But, analysts are not showing any signs of backing off. They are expecting an impressive 28% rise in Joy's second-quarter earnings per share. So, what gives?

Nothing to fear
True, recent spending cuts by mining majors such as BHP Billiton or Rio Tinto are cause for worry, but only in the longer run. The current situation continues to remain upbeat -- positive numbers from companies like Caterpillar (NYSE: CAT  ) is proof. Sales in Cat's mining business surged a whopping 73% during its first quarter, thanks to a robust global mining market. The U.S. coal sector might have been a little weak lately, but the company remains optimistic about international markets. In fact, so high is the demand for some equipment that at current capacity, Cat is quoting delivery times extending up to 2014.

Cummins' (NYSE: CMI  ) engine division (which is also its largest) revenue, too, climbed 20% during its first quarter as demand for mining engines rose. The company is now pegging its full-year engine division's revenue growth at 10%, keeping in mind strong construction and mining markets.

Joy's first quarter was a strong one, with both underground mining machinery and surface mining equipment divisions clocking double-digit sales growth. Analysts are expecting Joy's top line to grow by 35% during the quarter, which looks achievable.

Inorganically good
Joy's recent acquisitions should complement its organic growth. After acquiring mining and drilling equipment maker LeTourneau Technologies last year, Joy took over Chinese equipment-manufacturer International Mining Machinery (IMM) in the first quarter.

The LeTourneau acquisition contributed positively to Joy's order books and operating margins in the first quarter, and is likely to do so in the second quarter as well. The company expects the IMM acquisition to add $300 million to the top line, or around $0.50 to its EPS over the next three quarters, a part of which should be reflected in its second-quarter numbers.

The IMM acquisition in particular could prove to be a great value addition for Joy, helping it gain traction in high-potential mining markets like China. It's a huge market, and an attractive one, too. Which explains why General Electric (NYSE: GE  ) recently announced plans to take over two mining-equipment companies targeting some of the top mining markets of the world, including China.

With newer entrants like GE, competition in this space will only get stiffer. Joy might have to work a little harder now, especially after rival Cat became the bigger player in terms of total mining product range recently. Cat is also expanding aggressively in the region. I'd keep a close watch on how Joy integrates IMM's business -- a glimpse of which might be available in the upcoming earnings call.

Solid top-line growth in the first quarter, and the addition of IMM, in particular, encouraged Joy to increase its full-year earnings guidance range to $7.4-$7.8 per share. That's not all. Joy also raised its revenue guidance range to $5.6-$5.8 million.

The Foolish bottom line
Slowdown concerns in China have pulled Joy's shares down by a whopping 33% in the past five days alone. The stock is trading very close to its 52-week low of $57.48. Like Cat, which is also not too bearish on China's prospects, if Joy also rings the optimism bell in its earnings call and comes up with good numbers, its stock could get a much-needed boost.

Keep checking for more detailed analysis and coverage on the company. Click here to add Joy Global to your stock watchlist to stay updated.

While you wait for Joy's earnings report, check out our brand new free report: "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America, one that we believe will crush the market in the year ahead. Get instant access to the name of this company by clicking here -- it's absolutely free

Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Joy Global. Motley Fool newsletter services have recommended buying shares of Cummins. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (14)

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: 1895618, ~/Articles/ArticleHandler.aspx, 10/27/2016 9:36:28 AM

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 12 hours ago Sponsored by:
DOW 18,199.33 30.06 0.00%
S&P 500 2,139.43 -3.73 0.00%
NASD 5,250.27 -33.13 0.00%

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

10/26/2016 4:02 PM
JOY $27.85 Down -0.06 +0.00%
Joy Global CAPS Rating: ****
CAT $84.13 Down -0.35 +0.00%
Caterpillar CAPS Rating: ***
CMI $126.52 Up +0.95 +0.00%
Cummins CAPS Rating: *****
GE $28.87 Up +0.22 +0.00%
General Electric CAPS Rating: ****