Joy Global's Profits Plunge in Fourth Quarter

The pain continues for mining equipment manufacturers as Joy Global (NYSE: JOY  ) today reported a rough fourth quarter, sending its share price down more than 4%. It reported a revenue decline of 26% year over year and an operating margin decline -- adjusted for one-time items -- from 21.7% down to 16.3%. That all rolled into earnings of $26.8 million, or $0.25 per share, which was a staggering 86% decline from last year's result. 

Management also noted that earnings for its fiscal 2014 would be lower than many anticipated due to weak commodity prices which have reduced the number of orders from mining companies. During its fourth quarter Joy Global's orders fell 19% to $1.1 billion; it wasn't much of a surprise for investors as this weakness has been the norm for several quarters now.

Although the quarter was a brutal one, management finds a small silver lining in its aftermarket orders.

"This quarter once again demonstrates outstanding execution in a difficult market," said Mike Sutherlin, president and CEO, in a press release. "We were very encouraged by the sequential recovery of aftermarket orders. This puts us almost back to the levels of a year ago, even though some regions are still lagging. It was especially good to see the return of machine rebuilds to the U.S. underground business, which is an important step in the recovery of this market segment."

Going forward, commodity demand will likely be a major driver for Joy Global's business. It's a cyclical industry and years of weak demand will threaten the company's profitability. That said, even with a rough fourth quarter the company was able to produce roughly $160 million in free cash flow -- that's substantially larger than its earnings of $26.8 million and something positive for investors to watch going forward.


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