Wednesday, June 1, 2011

Joy Global Inc. (NASDAQ: JOYG): Q2 Earnings Preview 2011

Joy Global Inc. (NASDAQ: JOYG) is scheduled to release its fiscal first-quarter earnings before the opening bell  on Thursday, June 2, 2011. Analysts, on average, expect the company to report earnings of $1.35 per share on revenue of $1.03 billion. In the year ago quarter, the company reported earnings of $1.15 per share on revenue of $896.22 million. 

Joy Global Inc. engages in the manufacture and servicing of mining equipment for the extraction of coal, and other minerals and ores worldwide. The company operates in three segments: Underground Mining Machinery, Surface Mining Equipment, and Crushing and Conveying. Underground equipment makes up almost half of the company's net revenue.

In the preceding first-quarter, the Milwaukee, Wisconsin-based company's net income was $102.23 million, or 96 cents per share, compared to $76.22 million, or 73 cents per share, in the year-ago quarter. Revenue  increased 19% to $869.53 million from $729.22 million. Analysts, on average, expected the company to report earnings of $1.07 per share on revenue of $881.12 million.   

The company's efforts to grab more business in the booming steel and power producing markets in China are paying off, allowing it to raise profit and revenue targets. The company expects to sustain its strong performance in 2011. At its last earnings call in March, Joy Global raised its fiscal 2011 forecast. The company expects earnings between $5.10 and $5.40 per share and revenues in the range of $4.0 billion to $4.2 billion. The company had said in December 2010 that it expects earnings per share to be between $5.00 and $5.30 and revenues in the range of $3.9 billion and $4.1 billion.

Joy Global is likely to benefit from a rebound in commodity markets and a faster-than-expected economic recovery. Commodity prices directly impact the demand for Joy Global's products and services. Meanwhile, the farm and construction machinery sector is benefiting from a global surge in capital expenditure in the agriculture and mining sectors. After putting off upgrades and repairs due to weak commodity prices, miners are beginning to spend money on equipments now that coal copper, and iron ore prices have recovered.Its portfolio is dominated by the coal industry, which accounts for three-quarters of revenues.

Industry experts expect Joy Global to flex its emerging market muscle and expand its product range in response to Caterpillar's (NYSE: CAT) aggressive plans to exploit the growth opportunities in the mining sector.

Joy Global recently agreed to acquire mining equipment manufacturer LeTourneau Technologies Inc. from Rowan Cos. (NYSE: RDC ) for $1.1 billion. The acquisition of LeTourneau will give the Milwaukee company exposure to oil and gas drilling equipment and will expand Joy's line of high-horsepower wheel loaders. LeTourneau specializes in giant electric-drive wheel loaders for surface mines. Joy Global Chief Executive Mike Sutherlin  expects the business to be accretive to Joy Global's earnings in the first year after the deal is completed and predicted that Joy Global will achieve $40 million in cost reduction synergies by 2013.

Full Disclosure: None.
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