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Joy Global Beats Earnings Estimates

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Joy Global Inc. reported adjusted earnings of $1.70 per share in the third quarter of fiscal 2013. The earnings compare unfavorably with $1.87 per share in the year-ago quarter.

However, earnings were 25.0% above the Zacks Consensus Estimate of $1.36.

Total Revenue

Joy Global reported net sales of $1.32 billion in the reported quarter, down 4.9% from $1.39 billion from a year ago. The decline was due to lower contribution from the Underground Mining Machinery (down 4.2%) and Surface Mining Equipment (down 5.1%) segments.

Geographically, revenue contributions decreased 10.9% year over year to $526.4 million from the United States and by 0.5% to $794.1 million from Rest of the World. Original equipment sales fell 8% and aftermarket sales dropped 2% year over year.

Net sales in the reported quarter surpassed the Zacks Consensus forecast of $1.17 billion.

Quarter Highlights

Booking in the fiscal third quarter dropped 36% from the comparable previous year quarter. Original equipment booking declined 76% year over year to $96.3 million, while aftermarket booking declined 13.2% year over year to $599.1 million.

Backlog at the end of the quarter was $1.58 billion, decreasing sequentially from $2.2 billion and year over year from $2.56 billion at the end third quarter fiscal 2012.

During the reported quarter, cost of sales declined 3.6% to $0.88 billion from $0.91 billion a year ago. Product development, selling and administrative expenses declined 6.8% year over year.

Operating margin decreased 79 basis points from the comparable year-ago quarter.

Interest expenses during the quarter declined by $3.2 million to $13.6 million.

Financial Update

Cash and cash equivalents as of Jul 26, 2013, were $486 million versus $263.8 million as of Oct 26, 2012.

Long-term debt as of Jul 26, 2013, was $1.27 billion, decreasing marginally from the year-end figure of $1.30 billion.

Net cash from operating activities was $350.7 million in the third quarter of fiscal 2013, compared with $150.9 million in the prior-year quarter. The increase in cash from operating activities was primarily attributable to favorable working capital changes.

Capital expenditure at Joy Global for the fiscal third quarter was $31 million, down from $55 million in the year-ago quarter. The mining equipment manufacturers are trying to lower their capex to cope with this sluggish demand scenario.


Joy Global’s end market has been hit by supply surplus and declining demand growth for most of the commodities. As a consequence, the higher cost mines are gradually going out of production.

However, the company reiterated its fiscal 2013 revenue forecast in the range of $4.9 billion to $5.0 billion. The fiscal 2013 earnings of the company are expected between $5.60 and $5.80 per share. Excluding restructuring charges, earnings per diluted share are expected between $5.75 and $5.95.

Other Company Releases

Astec Industries Inc. (ASTE - Free Report) reported earnings of 48 cents per share in the second quarter of 2013, lagging the Zacks Consensus Estimate of 55 cents by 12.73%.

Caterpillar Inc. (CAT - Free Report) announced second quarter 2013 operating earnings of $1.45 per share, lagging the Zacks Consensus Estimate of $1.71 by 15.2%.

H&E Equipment Services Inc. (HEES - Free Report) announced second quarter 2013 operating earnings of 31 cents per share, in-line with the Zacks Consensus Estimate.

Our View

Despite beating estimates, Joy Global continues to face declining backlog as well as order booking. The supply glut in the global market and fall prices of coal, metals and bulk commodities have resulted in decline in mining operation and consequently lower demand for mining equipment. In addition, customers have significantly reduced their capital expenditures, which in turn resulted in lower demand for mining equipment.

However, on the positive side, increased global steel production, more coal used to generate power in the U.S. and reduction of U.S. stockpile to the 5-year average are encouraging for this mining equipment manufacturer.
Joy Global currently has a Zacks Rank #4 (Sell).

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