Mining equipment giant Joy Global
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
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.
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
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 fool.com for more detailed analysis and coverage on the company. Click here to add Joy Global to your stock watchlist to stay updated.
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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.