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Joy Global (JOY) Cost Savings Bode Well, Order Drop Hurts
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On Sep 9, 2016 we issued an updated research report on Joy Global Inc. . This mining equipment producer is set to benefit from cost-saving initiatives, non-core asset sales and decision to defer non-critical capital expenditures. However, the ongoing decline in commodity prices and the drop in new bookings pose headwinds.
Joy Global missed both top- and bottom-line estimates in the third quarter of fiscal 2016 as tough market conditions led to a substantial decline in new bookings. The year-over-year revenue decline was due to lower contributions from the Underground Mining Machinery and Surface Mining Equipment segments.
Earnings at other companies in the mining were also down significantly. Caterpillar’s (CAT - Free Report) second-quarter earnings plunged 22%, reflecting challenging conditions in the mining, oil and gas, and rail markets. Meanwhile, H&E Equipment Services Inc. (HEES - Free Report) reported earnings per share of 21 cents in the second quarter, missing the Zacks Consensus Estimate by 27.6%.
Joy Global is presently focused on monetizing its non-core assets and utilizing the net proceeds to fortify its operation and financial position. The company aims to sell non-core assets in the range of $40 million to $50 million in fiscal 2016. Keeping with this, in Aug 2016, Joy Global completed the sale of its steel plate plant in Longview, TX for $29 million to Nucor Corporation.
Having generated impressive savings from its restructuring initiatives in fiscal 2015, Joy Global’s management extended the program to fiscal 2016. In the third quarter, restructuring expenditures totaled $25 million, concentrated primarily in North America and China. The company expects to incur additional restructuring charges of nearly $5 million in the fourth quarter of fiscal 2016 as it continues to reduce staffing levels and optimize its global manufacturing footprint.
However, the company’s prospects are being adversely impacted by a decline in new bookings. In the third quarter of fiscal 2016, bookings tumbled 17% year over year to $527 million. Underground and Surface Mining Equipment orders were down 21% and 24%, respectively.
Joy Global relies heavily on coal miners for the sale of its mining equipment as they contribute nearly 59% to its revenues. The company expects 2016 U.S. coal production to be 700 million tons, down 21% from the 2015 level, primarily due to lower demand for the fossil fuel in electricity generation. This could hurt the growth prospects of the company severely.
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Joy Global (JOY) Cost Savings Bode Well, Order Drop Hurts
On Sep 9, 2016 we issued an updated research report on Joy Global Inc. . This mining equipment producer is set to benefit from cost-saving initiatives, non-core asset sales and decision to defer non-critical capital expenditures. However, the ongoing decline in commodity prices and the drop in new bookings pose headwinds.
Joy Global missed both top- and bottom-line estimates in the third quarter of fiscal 2016 as tough market conditions led to a substantial decline in new bookings. The year-over-year revenue decline was due to lower contributions from the Underground Mining Machinery and Surface Mining Equipment segments.
Earnings at other companies in the mining were also down significantly. Caterpillar’s (CAT - Free Report) second-quarter earnings plunged 22%, reflecting challenging conditions in the mining, oil and gas, and rail markets. Meanwhile, H&E Equipment Services Inc. (HEES - Free Report) reported earnings per share of 21 cents in the second quarter, missing the Zacks Consensus Estimate by 27.6%.
Joy Global is presently focused on monetizing its non-core assets and utilizing the net proceeds to fortify its operation and financial position. The company aims to sell non-core assets in the range of $40 million to $50 million in fiscal 2016. Keeping with this, in Aug 2016, Joy Global completed the sale of its steel plate plant in Longview, TX for $29 million to Nucor Corporation.
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Having generated impressive savings from its restructuring initiatives in fiscal 2015, Joy Global’s management extended the program to fiscal 2016. In the third quarter, restructuring expenditures totaled $25 million, concentrated primarily in North America and China. The company expects to incur additional restructuring charges of nearly $5 million in the fourth quarter of fiscal 2016 as it continues to reduce staffing levels and optimize its global manufacturing footprint.
However, the company’s prospects are being adversely impacted by a decline in new bookings. In the third quarter of fiscal 2016, bookings tumbled 17% year over year to $527 million. Underground and Surface Mining Equipment orders were down 21% and 24%, respectively.
Joy Global relies heavily on coal miners for the sale of its mining equipment as they contribute nearly 59% to its revenues. The company expects 2016 U.S. coal production to be 700 million tons, down 21% from the 2015 level, primarily due to lower demand for the fossil fuel in electricity generation. This could hurt the growth prospects of the company severely.
Joy Global currently has a Zacks Rank #3 (Hold). A better-ranked stock in the mining equipment industry is Astec Industries, Inc. (ASTE - Free Report) , which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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