NEW YORK (TheStreet) -- Joy Global (JOY) stock is declining by 2.53% to $12.70 in early-morning trading on Wednesday, after its price target was cut to $16 from $21 at BMO Capital Markets yesterday afternoon.
The firm maintained its "outperform" rating on the stock.
Although Joy Global reported 2015 fourth quarter earnings ahead of BMO's estimates of 38 cents per share, the company expects fiscal 2016 revenue to range between $2.4 billion and $2.6 billion and per-share earnings to range between 10 cents and 50 cents, the firm noted.
These numbers fall short of Joy Global's fiscal 2015 revenue of $3.17 billion and adjusted per-share earnings of $1.95, BMO pointed out.
Next year will likely be "difficult" for Joy Global as the company's capacity utilization rate is about to break even around 35% and the mining industry's capital expenditures will likely fall 20% further, according to BMO.
Even so, Joy Global's management is among the best, and the company is poised to generate roughly $150 million of free cash flow in fiscal 2016, the firm added.
Based in Milwaukee, WI, Joy Global manufactures and services high productivity mining equipment for the extraction of coal and other minerals and ores.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate JOY GLOBAL INC as a Sell with a ratings score of D. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 1060.9% when compared to the same quarter one year ago, falling from $136.94 million to -$1,315.82 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Machinery industry and the overall market, JOY GLOBAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for JOY GLOBAL INC is currently lower than what is desirable, coming in at 27.78%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -152.01% is significantly below that of the industry average.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 70.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1073.18% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- JOY GLOBAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, JOY GLOBAL INC swung to a loss, reporting -$12.33 versus $3.30 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus -$12.33).
- You can view the full analysis from the report here: JOY