Joy Global Could Suffer From Weak Iron Ore, Coal Markets

NEW YORK (TheStreet) -- The volatility in shares of Joy Global  (JOY) , a manufacturer of coal and ores mining equipment, has risen in the past few months due to speculation about a potential takeover by the Swedish company Atlas Copco. Since the news broke back on July 16, Joy Global's stock has zigzagged, but as of Tuesday morning at 10 a.m. it had added 6.4% to its value and reached $63.99. Also, the company's quarterly adjusted diluted earnings per share at 76 cents were 6 cents higher than projections.

Despite takeover speculation and the quarterly earnings beat, the company's outlook remains grim due to weaker coal output in China and a challenging iron ore market.

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In 2014, the company still expects its revenue to reach, on average, $3.7 billion -- roughly 26% below 2013 revenue.

Why? The iron ore industry hasn't done well in the past few years on account of high iron ore inventories in China and falling prices in iron ore, which are currently around $90 per dry metric ton.

U.S. coal prices have rallied in recent months, mainly due to the severe winter and elevated natural gas prices. Nonetheless, coal production didn't pick up. Joy Global projects U.S coal output will rise in the coming quarters, which could increase the demand for its equipment.

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