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Joy Global Inc. (JOY - Analyst Report) reported adjusted earnings of $1.99 per share in the fourth quarter of fiscal 2012, compared with $1.83 per share in the fourth quarter of fiscal 2011. The results of the company were 9 cents higher than the Zacks Consensus Estimate of $1.90 for the quarter.

Fiscal 2012 adjusted earnings of Joy Global were $7.18 per share, compared with $5.92 per share in fiscal 2011. The results of the company were ahead of the Zacks Consensus Estimate of $7.10 for the fiscal year.

GAAP earnings per share for the fourth quarter were $1.99 and for the fiscal were $7.13. The difference between GAAP and operating earnings in the fiscal year emanated from the impact of discontinued operation.

Total Revenue

Joy Global reported net sales of $1,594.9 million in the fourth quarter of fiscal 2012 versus $1,335.3 million reported in the fourth quarter of fiscal 2011, reflecting year-over-year growth of 19.4%.

The actual results were ahead of the Zacks Consensus forecast of $1,415 million for the fourth quarter.

Joy Global reported net sales of $5,660.9 million for fiscal 2012 versus $4,403.9 million reported in fiscal 2011, which reflected growth of 28.5%. The actual results for fiscal 2012 were higher than the Zacks Consensus Estimate of $5,493 million.

The upside was driven by higher contribution from the Underground Mining Machinery and Surface Mining Equipment segments, while eliminations dragged down total revenue marginally. The contribution from the acquired assets also boosted the top line of the company.

Fiscal 2012 Highlights

Joy Global’s operating profit in the fiscal was $1.17 billion versus $0.9 billion in the year-ago period, reflecting year-over-year growth of 20.7%. The positive impact from higher sales volume from the legacy business and contribution from acquired assets boosted results. The profits were marginally offset by restructuring costs and an increase in period costs.

Total bookings at Joy Global during the fiscal year were $5.07 billion, down 9.3% from the previous year-end level of $5.59 billion. The 20% decline in orders from Joy Global’s legacy underground and surface businesses led to the decline in total bookings. However, incremental bookings from LeTourneau and International Mining Machinery to some extent offset the shortfall.

The total backlog at the end of fiscal 2012 was $2.6 billion reflecting a decline of $0.6 billion from the fiscal 2011 backlog.

Net interest expense in fiscal 2012 was $67 million, up from $24 million in the previous fiscal. The increase stemmed from acquisition financing.

Financial Condition

Cash and cash equivalents of Joy Global as of October 26, 2012, were $263.9 million versus $288.3 million as of October 28, 2011.

Cash provided by operating activities during fiscal 2012 was $463.9 million versus $499.7 million provided in the previous year.

Capital expenditures were $242 million in fiscal 2012, compared with $111 million in the prior year. The increase was attributable to continued investments in global capacity and aftermarket service infrastructure at the company.

Guidance

Joy Global expects revenue to range from $4.9 billion to $5.2 billion for fiscal 2013. The company expects fiscal 2013 earnings per share to range between $5.90 and $6.50.

The company continues to invest in global capacity and efficiency and has thus allocated $200 million in fiscal 2013 for this purpose.

Peer Comparison

Joy Global competes head-to-head with the industry behemoth Caterpillar Inc. (CAT - Analyst Report). Caterpillar reported record third quarter 2012 both in terms of earnings per share (EPS) and revenues. EPS in the quarter was $2.54, a 49% increase from $1.71 in the prior-year quarter, and way ahead of the Zacks Consensus Estimate of $2.21.

Revenues upped 5% to $16.4 billion in the quarter, but fell short of the Zacks Consensus Estimate of $16.7 billion.

Our View

Fiscal 2012 has been a transitional year for Joy Global. Depleting backlogs and decline in orders from some of the key markets pulled back results, while contribution from acquired assets boosted performance.  Even though the company surpassed our expectation, the decline in yearly bookings and total backlog is our major concern.

The increasing use of cheap natural gas for power production in the domestic market is driving down the demand for coal, which in turn is lowering demand for mining equipment. In the international market, the demand from China is yet to recover fully, while rising costs and a weak pricing environment are lowering the profitability of mining in Australia.

The aforesaid factors will definitely play a vital role in determining the prospects of Joy Global, as the company sources a major portion of its orders from these markets.

Mining equipment manufacturer and service provider Joy Global Inc. is based in Milwaukee, Wisconsin. The company caters to its global consumers and provides manufacturing, distributing and servicing equipment for surface mining, through its P&H Mining Equipment division, underground mining, through its Joy Mining Machinery division and bulk material conveyor systems, through its Continental Crushing & Conveying division. Joy Global currently retains a short-term Zacks #4 Rank (Sell rating).

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