Joy Global Inc. (JOY), Caterpillar Inc. (CAT): Three Vital Numbers You Should Know if You Own This Commodity Stock

The problem is that the Chinese coal market is in pretty bad shape as supply continues to exceed demand, but things could improve soon. For the four months through April, China’s coal imports were 25% higher while power consumption grew 5% year over year. Rio Tinto plc (ADR) (NYSE:RIO) even expects to sell record iron ore amounts to China this year. As demand in the Middle Kingdom picks up and idled plants get back to work, orders for Joy’s equipment — both original and aftermarket — should gather steam. In fact, the aftermarket business could be Joy’s strongest weapon in a downturn.

52% looks safe
Few investors know that 52% of Joy’s revenue last year came from aftermarket sales: replacement parts, rebuilds, and maintenance and repair services. Even in an otherwise lackluster second quarter, Joy’s aftermarket bookings increased 10% sequentially. That proves how aftermarket sales are less prone to cyclical swings than original equipment.

Caterpillar Inc. (NYSE:CAT), which doesn’t provide separate numbers for its aftermarket sales, has started taking the business more seriously, as evidenced by its recent purchase of a used-equipment business, Cat Auction Services, from its dealers. Still, Joy can beat Caterpillar Inc. (NYSE:CAT) in this game, provided it nimbly exploits its strong foothold in the market. Looks like Joy knows what to do, because management already expects an even higher share of revenue from aftermarket sales next year.

The Foolish bottom line
Strong global presence and a resilient aftermarket business can help change Joy’s fortunes, but only when the coal industry revives. Positive signals from China also need to be sustained a little longer to instill confidence among investors.

While I don’t see any strong catalyst for Joy’s stock in the near future, its downside could be limited as well, since the pessimism largely seems factored into its current price. The company is handling its inventory well, and doing a good job with margins. You might want to wait for stronger buy signals, but you shouldn’t miss that opportunity when it comes.

The article 3 Vital Numbers You Should Know if You Own This Commodity Stock originally appeared on Fool.com and is written by Neha Chamaria.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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