Shares of mining equipment maker, Joy Global (NYSE:JOY) seem to be headed for a strong reversal. After months of weakness, the stock stumped the Street with a solid 10% gain in October. But is the worst really over for Joy Global, and can investors expect the stock to continue heading north this month?

The story so far
Joy Global's growth depends largely on the commodity markets, and news hasn't been too good lately. Metal prices continue to remain subdued, and major mining companies are aggressively cutting back their capital expenditures. That naturally means lower orders for Joy's mining equipment, which was reflected in the company's last quarter when its new orders fell 36% year over year. Worse yet, bookings slipped 38% sequentially, indicating that the end markets are only getting weaker.

Though Joy expects its fourth-quarter bookings to increase sequentially, the recovery could be painfully slow. Just last month, Caterpillar (NYSE:CAT) not only reported a massive 42% drop in revenue from its mining equipment division, but also reduced its full-year earnings per share guidance by 15%, citing uncertainty in the mining markets. Caterpillar has also just announced the closing of a highwall miners equipment manufacturing plant in West Virginia as a part of its cost-reduction efforts.

Joy Global may have more reasons to worry than Caterpillar, since it has a much greater exposure to the mining industry. That may explain why Joy projects its 2014 revenue to take a 20% hit even as Caterpillar expects its next year's revenue to be flat to 5% lower. Furthermore, Joy also has a lot at stake in China where growth remains slow. In a recent report, Fitch downgraded its 2014 growth projection for China to 7% from its earlier 7.5% forecast.

None of this bodes well for Joy Global, especially since the company's backlog value is depleting fast – It slipped 28% sequentially to $1.6 billion during the third quarter. So if new orders do not come in, Joy's top line could shrink at an alarming pace.

What now?
Given the headwinds, it may be too early to say that Joy Global shares have bottomed out. The market seems to have found hope in the company's recently announced share buyback program worth $1 billion and restructuring initiatives. While the former indicates management's confidence in the business, the cost-cutting efforts should help the company save nearly $50 million this year and another $75 million in financial year 2014.

Moreover, Joy's shares are nearly half as cheap as Caterpillar's at 8.7 times earnings even after the recent run up. That may sound like a bargain, but investors may have to put up with considerable volatility, at least in the near term. That Joy's shares trade at 16 times forward earnings further suggests that the market expects the company's earnings to fall considerably over the next one year. That doesn't excite me, and I'll rather sit out the discount until the mining industry turns the corner.