OK, I give up. I figured that Joy Global (NASDAQ:JOYG) was going to do well, but not this well. I assumed investors might give the company some benefit of the doubt for an extended increase in global mining equipment demand, but I wasn't necessarily expecting this much enthusiasm.
So that's it: I surrender. Want to buy a hot stock in a hot space servicing other hot sectors like coal, copper, gold, and oil sands? Here you go. Want a detailed rundown on the valuation picture and what discounted cash flows over the next 15 years mean for the stock price? Nuh-uh. Sorry. Not gonna do it.
All quips aside, this was another great quarter for this maker of heavy-duty machinery. Sales climbed 36%, operating income almost doubled, and net income nearly tripled. Cash flow was also strong; structural free cash flow (sometimes called owner earnings) apparently jumped about 83% from last year's level.
This company seems to be firing on all cylinders. Orders were up 37%, and the company is pretty much sold out for 2006 -- if you order today, expect delivery in 2007. What's more, the international picture remains bright, with both China and Russia spending more on machinery and equipment.
Management also made some big-picture comments that I found interesting. They expect several years of strong coal prices, since it takes a long time to increase coal production by meaningful amounts. Interestingly, they seem to slightly oppose the consensus view by predicting that met coal (used in steel-making) might soften a bit relative to steam coal (used in electricity). Whether they're right or not, shareholders in companies like Arch Coal (NYSE:ACI), Peabody (NYSE:BTU), and Fording (NYSE:FDG) might want to give that a little thought.
Joy Global's current success isn't just about coal. Mining equipment and electric shovels are also used to harvest gold, copper, iron ore, and tar sand deposits -- all of which are hot markets right now. Sure, competitors such as Caterpillar (NYSE:CAT), Ingersoll-Rand (NYSE:IR), and Bucyrus (NASDAQ:BUCY) will get their share of business, but there should be plenty to go around.
As I said at the outset, I'm raising the white flag on valuation. At the risk of sounding snotty or bitter, I'll just point out that sooner or later, orders will decline, and the downward side of the cycle will kick in. How long before that happens? I've given up on guessing.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
