, led by Jerry Revich, decided Wednesday morning to bump the firm's rating of Joy Global stock to buy from neutral, citing a "wave of positive catalysts."
Within the meta-world of sell-side stock analysis, those catalysts included the very upgrade from Goldman. Joy Global's shares were rising Wednesday afternoon by 6%, or $2.92, to $51.19.
Goldman's bullish view rests on the bedrock of "capex" -- the amount in capital expenditures that mining companies around the world have indicated they'll spend this year on the purchasing of new equipment. According to Revich's research, mining industry capex will likely increase by 30% in 2010 from the depressed levels of 2009.
Further, Revich wrote in a note to clients, metals prices look to be headed higher, notwithstanding a European debt crisis that had sparked fears of worldwide contagion, and notwithstanding China's recent moves to scale back growth as officials there attempt to manage the risk of an overheated economy.
But Europe appears to have stabilized for the moment, and Chinese monetary and fiscal authorities have won praises for their cool-headed ability to perform just that sort of management. China, of course, has largely saved industrial-metals prices over the last year and a half with its voracious appetite for raw materials.
(Joy, which specializes in the machinery used in underground mining, has
enticed other observers
with its aggressive plans to expand its business in China.)
Any softening of the Chinese economy has long been feared by metals producers. But Revich attributed his general bullishness to a widely cited idea: that supply constraints promise to support the markets of industrial metals, especially copper, nickel and iron ore, no matter if China's economy doesn't grow as fast as expected.
With demand higher than what's currently available to dig out of the earth, miners will be mining more and thus in need of more of Joy Global's shuttle cars, conveyer trains, roof bolters, longwall shearers, armored face conveyers, walking draglines and/or rotary blasthole drills -- or so the cyclical-upswing argument goes.
Should that outlook come to pass, it would also help Joy's cross-town rival
(both are based in and around Milwaukee), which recently acquired the
last year, and the diversified big-daddy
, which specializes in the Star Wars-size dump trucks used to move rocks from here to there inside
. (Both stocks were moving higher Wednesday, with Bucyrus gaining 5% and Caterpillar 1.6%.)
As a group, Wall Street's sell-side analysts are expecting Joy Global to report a profit of 77 cents a share for its second quarter, on revenue of $755 million, according to a survey by
. That represents a precipitous drop from a year ago, when the company earned $1.17 a share on revenue of nearly $1 billion.
Joy was able to maintain results at a fairly high level last year by continuing to work through a bulbous backlog that had expanded during the boom.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.