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Joy Global Lags on Earnings

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Joy Global Inc. reported adjusted earnings of 49 cents per share in the first quarter of fiscal 2014. The earnings compare unfavorably with $1.31 per share in the year-ago quarter.

Earnings were 23.4% lower the Zacks Consensus Estimate of 64 cents.

Total Revenue

Joy Global reported net sales of $0.84 billion in the reported quarter, down 26.9% from $1.15 billion from a year ago. The decline was due to lower contribution from the Underground Mining Machinery (down 19.1%) and Surface Mining Equipment (down 33.8%) segments.

Softness in demand persists in the global mining market. Geographically, revenue contributions decreased 27.7% year over year to $308.9 million from the United States and by 26.6% to $530.4 million from Rest of the World. Original equipment sales fell significantly by 49.2% and services dropped 8.5% year over year.

Net sales in the reported quarter surpassed the Zacks Consensus forecast of $0.81 billion by 3.7%.

Quarter Highlights

Booking in the fiscal first quarter dropped 16% from the comparable previous year quarter. Underground Mining Machinery booking declined 24.7% year over year to $451.0 million, while Surface Mining booking declined 13.8% year over year to $433.5 million.

Backlog at the end of the quarter was $1.5 billion, in-line with backlog at the beginning of the quarter.

During the reported quarter, cost of sales declined 21.8% to $604.2 million from $773.1 million a year ago. Product development, selling and administrative expenses declined 2.7% year over year. The decline in expenses was a function of the cost savings initiatives undertaken by Joy Global.

Interest expenses during the quarter declined by 8.6% to $13.8 million.

Financial Update

Joy Global’s cash and cash equivalents as of Jan 31, 2014, were $290.9 million versus $405.7 million as of Oct 25, 2013.

Long-term debt as of Jan 31, 2014, was $1.24 billion, decreasing marginally from the year-end figure of $1.25 billion.

Net cash from operating activities was $64.9 million in the first quarter of fiscal 2014, compared with $90.5 million in the prior-year quarter. The decline in cash from operating activities was primarily attributable to lower net income and unfavorable working capital changes.

Capital expenditure at Joy Global for the fiscal first quarter was $27 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 expect its fiscal 2014 total revenue in the range of $3.6 billion to $3.8 billion.

Excluding restructuring charges and unusual items earnings per diluted share are expected between $3.10 and $3.50.

Joy Global expects to continue with its share repurchase program in fiscal 2014 as it is hopeful to generate ample cash flow to fund its buyback program.
Other Company Releases

Astec Industries Inc. (ASTE - Free Report) reported earnings of 36 cents per share in the fourth quarter of 2013, beating the Zacks Consensus Estimate of 31 cents by 16.1%.

Caterpillar Inc. (CAT - Free Report) announced fourth quarter 2013 operating earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.29 by 19.4%.

H&E Equipment Services Inc. (HEES - Free Report) announced fourth quarter 2013 operating earnings of 41 cents per share, beating the Zacks Consensus Estimate by a penny.

Our View

Joy Global missed earnings estimates in the fiscal first quarter as reduction in demand continues to be a headache for the mining equipment manufactures.

The global outlook holds promise for the mining equipment manufacturers, but at the same time supply glut of commodities in the global market is putting a downward pressure on prices and lowering demand for the mining equipment.

However, the global steel production is expected to grow by 3.3% in 2014 and sudden rise in natural gas price in U.S. could increase mining operation and act as a positive catalyst for the equipment manufacturers.  

Joy Global currently has a Zacks Rank #2 (Buy).

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