More recently, April’s crash in gold prices has led to calls that the commodity supercycle might finally be turning downward. If true, that could plunge the mining industry into a long-term decline and threaten sales of mining equipment for years. Let’s take an early look at what’s been happening with Joy Global Inc. (NYSE:JOY) over the past quarter and what we’re likely to see in its quarterly report.
Stats on Joy Global
| Analyst EPS Estimate | $1.57 |
| Change From Year-Ago EPS | (23%) |
| Revenue Estimate | $1.28 billion |
| Change From Year-Ago Revenue | (17%) |
| Earnings Beats in Past 4 Quarters | 3 |
Source: Yahoo! Finance.
Will Joy Global’s earnings bring investors any joy this quarter?
In light of recent events, analysts haven’t been all that optimistic about Joy’s earnings prospects over the past several months, with cuts of $0.06 per share to their April-quarter estimates as well as reductions for the fiscal 2013 and 2014 years. The stock has performed pretty badly, losing more than 11% since late February.
Early in the quarter, things were beginning to look up for Joy Global Inc. (NYSE:JOY). In its previous quarterly report, Joy said that conditions in the commodity markets looked like they were starting to improve, especially in the coal market, where rising natural gas prices were finally helping to support demand.
But sales trends remain abysmal in many parts of the market, especially in the former growth hot-spot of the Asia-Pacific region. Rival Caterpillar Inc. (NYSE:CAT) has seen sales in the region swing from year-over-year gains as recently as November to declines of 20% or more in each of the past three months. Latin America has been a bright spot for Caterpillar Inc. (NYSE:CAT), but otherwise, the rest of the world has seen a substantial slowdown, with overall sales down 13% in April.
Moreover, the big drop in commodities prices in April will almost certainly weigh even further on mining-company demand for equipment in the future. With dramatically lower profit margins possible, especially among some miners with high cost structures, capital budgets could see further cuts and reduce sales further for Joy Global Inc. (NYSE:JOY), Caterpillar, and other mining-equipment makers.
One interesting side-note is whether the drop in Joy Global Inc. (NYSE:JOY)’s stock will lead to further speculation about its being a takeover target. Ever since last year, General Electric Company (NYSE:GE) has been named as a potential buyer of Joy Global in General Electric Company (NYSE:GE)’s efforts to boost its own presence in the mining-equipment industry.
In Joy Global Inc. (NYSE:JOY)’s quarterly report, watch to see whether future CEO Edward Doheny starts to assume his new leadership role on the conference call. With current CEO Michael Sutherlin formally retiring next February, it’ll be essential for Joy to establish a smooth transfer of power given the tough times facing the company.
The article How Joy Global Will Survive Commodities’ Plunge originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of General Electric.
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