Most stocks are in the black today as the market is finally rallying after 5 hard sell offs in a row, and one of the stocks leading the way is Joy Global (JOYG). Joy Global makes and services mining equipment, and released better than expected earnings today in spite of the difficult operating environment. This is particularly impressive considering the fact that commodity prices have cratered in the last year as global demand has fallen off. The company maintained their guidance for the year ahead, which surprised some but the company did admit that global demand is expected to remain weak. The gang on CNBC’s Closing Bell had this to day about JOYG:
“And how about Joy Global? Bob talked a lot about this China story today, some of those mining stocks doing good, including Joy Global with their mining equipment business up 13%. Their earnings beat and also the outlook was better than expected …”
Joy’s results truly did surprise as revenue was up 18% worldwide and an astonishing 46% in the United States market. This strength in sales propelled the company to raise net income 21% as well. The company also ran a leaner operation as well, as margin edged up to 17.9% from 17.4%. All of these factors led to Joy Global earning 83 cents per share which was 7 cents better than expected. Coming into the day the stock was trading at $15.85, and they have earned $3.63 in the past 12 months. Trading at 4.4 times earnings, clearly the market was expecting some grim results out of Joy Global. However, the fact that earnings were better than expected and the company is not backing off on their guidance going forward gave the market something else to rally behind. Furthermore, as the commentator on CNBC mentioned, JOYG could take advantage of the recovery in China. China is discussing a second round of stimulus, and when that economy resumes its break neck growth their voracious hunger for resources will resume.
We are maintaining our Undervalued valuation of Joy Global, as the company has shown strength even in a very tough economy. The company has a relatively small amount of long term debt, and eventually commodity prices will begin to rebound which should be a great boon for miners like Joy. They are doing the right things to make it through this rough patch and even after the appreciation today, Joy Global is still an appealing long term value.