Joy Global (JOYG): Joy to the World

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 …”

JOYGJoy’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.

Joy to the World

About Ockham Research 645 Articles

Ockham Research is an independent equity research provider based in Atlanta, Georgia. Security analysis at Ockham Research is based upon the principle known as Ockham's Razor, named for the 14th- century Franciscan friar, William of Ockham. The principle states that a useful theory should utilize as few elements as possible, because efficiency is valuable. In this spirit, our goal is to make the investing environment as simple and understandable as possible, yet no simpler than is necessary.

We utilize this straightforward approach to value over 5500 securities, with key emphasis given to the study of individual securities' price-to-sales, price-to-cash earnings and other historical valuation ranges. Our long term value investing methodology is powered by the teachings of Ben Graham and it has proven to be very adept at identifying stock prices that are out of line with fundamental factors.

Ockham Research provides its research in a variety of forms and products including our company specific reports, portfolio analytics tools, newsletters, and blog posts. We also offer a white labeling research solution that can give any financial services firm their own research presence without the time and cost associated with building such a robust coverage universe of their own.

Be the first to comment

Leave a Reply

Your email address will not be published.