Why Shares of Joy Global Inc. Jumped 20% Today

Do better-than-expected earnings indicate a turnaround in the mining sector?

Travis Hoium
Travis Hoium
Jun 2, 2016 at 3:42PM
Industrials

Image source: Joy Global.

What: Shares of mining equipment maker Joy Global Inc. (NYSE:JOY) jumped 20% late in trading Thursday after reporting fiscal second-quarter earnings.

So what: Sales fell 26% in the quarter to $602 million, and the company swung from a profit of $56.0 million a year ago to a loss of $9.8 million, or $0.10 per share. Management also noted that bookings were down 9% from a year ago to $681 million, and cash generated from operations fell $27 million to just $44 million.  

Despite all of this bad news, adjusted earnings per share were $0.09, easily topping the $0.03 per share loss Wall Street was expecting. And that outperformance was enough to send shares sharply higher today.

Now what: This is really a case of performance being slightly better than already-depressed expectations. Low commodity prices and a weak mining environment globally is no surprise to anyone today, and if you look at bookings versus revenue and cash generation, we may be seeing the market hitting bottom -- and maybe even improving slightly. While there may be a slight improvement in mining equipment demand, I don't see this being a long-term trend, and with Joy Global still losing money, I don't see a reason to jump into the stock today.