Industrials

Is Joy Global's Long-Term View More Attractive After Earnings?

Paul Ausick

Published: June 5, 2016 10:25 am

Last Updated: January 13, 2020 7:10 am

Mining equipment maker Joy Global Inc. (NYSE: JOY) reported fiscal second-quarter results Thursday that surprised to the high side. Quite an accomplishment in one of the sectors that has been hit hardest by the pressure on energy and basic materials prices.

The company reported adjusted diluted earnings per share (EPS) of $0.09 on revenues of $602 million. That compared with EPS of $0.64 and revenue of $810.5 million in the second quarter of its last fiscal year. Results beat consensus estimates calling for break-even EPS and were close to the estimate of $607.72 million in revenue.

Since reporting, the stock price has added $4.00 a share at Friday’s closing price, a gain of 24% from Wednesday’s closing price of $16.70. Analysts mostly reacted favorably, with most raising price targets and maintaining existing ratings.

Merrill Lynch was a bit of an exception, maintaining its Neutral rating and its price objective of $22 a share. The analysts noted that the second-quarter results were likely “good enough” with a book-to-bill ratio of more than one, solid service orders and a decremental margin of 34%. The company lowered its outlook slightly to the low end of its prior range of $2.4 billion to $2.6 billion and kept is EPS forecast of $0.10 to $0.50.

S&P Global maintained a Sell rating on the stock with a 12-month price target of $13. The S&P analysts said, “While equipment bookings of $167 million are up 12% vs. last year, service bookings are down 14% to $514 million. We are cautious on the mining industry’s austerity trends.”

Other price target changes included the following:

• Baird raised its price target from $25 to $26 with an Outperform rating.
• BMO raised its price target from $23 to $24 and kept its Outperform rating.
• Citigroup lifted its price target to $20 with a Neutral rating.
• JPMorgan boosted its price target from $10 to $17 with a Neutral rating.

For the company’s third quarter, analysts now look for EPS of $0.12 and revenues of $611.69 million. For the fiscal year ending in October, the consensus estimates call for EPS of $0.16 and revenues of $2.44 billion.

Joy Global’s shares closed at $20.70 on Friday, up about 1.7% on the day, in a 52-week range of $8.35 to $41.00. The consensus price target on the stock is $19.53 and may not include these most recent changes.