The company's shares recorded a 52-week high Jan. 13 and have since tumbled 27%. Still, Joy Global's attractive attributes compensate for its outsized price swings.
Fiscal fourth-quarter net income ascended 5.1% to $124 million, and earnings per share climbed 8.1% to $1.20. Revenue contracted 6.6% to $964 million and the operating margin stalled at 19%. Joy Global's cash balance more than doubled from a year earlier. Its 0.7 debt-to-equity ratio is less than the industry average.
It's not all sunshine and smiles in the company's latest press release. Quarterly bookings dropped 44% to $1.2 billion, but improved 6% sequentially, a sign that equipment investment is improving. Underground sales fell 10%, crushing and conveying sales dropped 20%, and underground original equipment sales were little changed. China's appetite for commodities is satiable, and U.S. demand has improved but is still weak.
Management notes that sales will continue to benefit from emerging-market demand, specifically in India and China, but warns of a slip in the U.S. following the de-stocking rebound. But China imported six times more metallurgical coal over a 10-month period than in the previous year, bolstering spot prices and mining activity. And thermal coal imports doubled on electricity demand.
Chief Executive Officer Michael Sutherlin describes recently ended fiscal 2009 as "the cyclical floor for incoming orders based on consistency of the order rate over the past four quarters, the continuation of strong commodity demand from emerging markets complemented by improving commodity demand from the major industrialized countries." In fiscal 2009, sales split evenly between the U.S. and the rest of the world.
Joy Global's shares are cheap relative to those of machinery peers based on trailing earnings, projected earnings and cash flow. The stock's price-to-earnings ratio of 10 and price-to-projected earnings ratio of 12 represent 66% and 42% discounts to peer-group averages. During the past three years, Joy Global's revenue grew 14% annually, on average, as earnings per share climbed 9.4% a year.
Of 17 analysts surveyed by Bloomberg, nine recommend purchasing shares and the remainder advise holding. The most bullish price target, coming from
Stern, Agee & Leach
Sidoti & Co.
, is $70, implying that 57% upside remains.
stock model rates Joy Global "buy" and projects a price of $58.46. Competitor
, however, garners a higher overall score.
-- Reported by Jake Lynch in Boston.