Tags: Joy Global | stock price | investment

Joy Global Poised for Substantial Gains During the Next 12-18 Months

By    |   Thursday, 12 Jun 2014 03:52 PM

After trading in a sideways basing pattern since July 2012, my research indicates that Joy Global (JOY), one of the world’s larger manufacturers of equipment for the mining industry, will break out of that trading range within the next two months and trend substantially higher than its current level during the next 12-18 months.

Joy Global manufactures original equipment and aftermarket parts for both underground and surface mining, as well as for certain industrial applications. The company’s equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands, gold and other minerals. Its principal manufacturing facilities are located in the United States, including facilities in Pennsylvania, Wisconsin, Texas and Alabama. The company also operates facilities in China, the United Kingdom, South Africa and Australia.

As of Oct. 25, 2013, Joy Global employed approximately 16,600 employees worldwide, with approximately 5,900 employed in the United States.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

For its fiscal year ended Oct. 31, 2013, sales of Joy Global’s original equipment for the mining industry accounted for 45 percent of the company’s revenues while sales of its aftermarket products and services, which includes revenues from sales of replacement parts, electric motor rebuilds, equipment erection services, and maintenance and repair services, accounted for the remainder of the company’s revenues.

In regard to regions of the world where Joy Global sells its products and services, the company generated 43.5 percent of its revenues from sales in the United States, 15 percent from sales in Australia, and 11.3 percent from sales in Europe during the company’s fiscal year ended Oct. 31, 2013. The remainder of the company’s revenues was generated from sales in various other countries.

Joy Global is headquartered in Milwaukee, Wisconsin. The company is the successor to a business that began operations almost 130 years ago.

Revenues, Earnings, and Financial Condition


Joy Global’s revenues and earnings declined considerably during 2013 in response to economic slowdowns in most regions of the world.

For example, during 2013 China’s economy grew at the slowest pace since 2001 while India’s economy grew at the slowest pace since 2002 and the eurozone economy contracted.

Meanwhile, the pace of economic growth in the United States slowed to an annualized rate of 2.6 percent during the fourth quarter of 2013, from 4.1 percent during the third quarter.

Looking forward, my research indicates that those trends are in the process of reversing, with numerous leading economic indicators for the United States, Europe and India suggesting that the pace of economic growth in those regions of the world will increase during the second half of this year.

Any such developments would bode well for Joy Global, whose revenues and earnings are highly correlated with economic conditions and the pace of world economic growth.

For example, when most economies around the globe grew at fast rates from the beginning of 2004 to the end of 2006, Joy Global’s revenues almost doubled from $1.2 billion for its fiscal year ended Oct. 31, 2004 to $2.4 billion for the fiscal year ended Oct. 31, 2006. During that period, the company’s annual revenue growth ranged from 17.8 percent to 34.6 percent.

And, the company’s net income rose five-fold from 2004 to 2006 – from $55.3 million for the 12 months ended Oct. 31, 2004 to $414.4 million for the same period during 2006.

In contrast, following the worldwide economic recession that began during December 2007, Joy Global’s revenues and earnings grew at a very slow pace, with its revenues rising by only 3.1 percent from the beginning of 2008 to the end of 2010.

However, when the pace of economic growth accelerated in most regions of the world during 2011 and 2012, Joy Global’s revenues and earnings began to grow again at fast rates, with its revenues rising by 25 percent and 28.5 percent for the years ended Oct. 31, 2011 and 2012, respectively, and its net income rising by 31.1 percent and 25 percent during those respective periods.

Meanwhile, Joy Global is strong financially, with the company’s current assets covering its current liabilities by a ratio of 2.2-to-1, and its long-term debt accounting for only 38 percent of the company’s total tangible assets, as of May 2.

Valuation and Stock Recommendation

With my research indicating that Joy Global will grow its net earnings per diluted share at an average annual rate of around 20 percent during the next three years, and the company’s stock closing today at a price-to-earnings multiple of only 15, stock market participants appear to be undervaluing JOY.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

As a result of the factors and developments mentioned in the sections above, I would advise stock market speculators and aggressive investors to allocate a portion of their financial market assets to Joy Global’s stock at prices below $61.50. JOY fell $1.49, or 2.4 percent, to close Thursday at $60.86.

David N. Frazier has an extensive background in the investment securities industry and has invested in the financial markets for more than 25 years.

In addition to working as a business analyst, merchant banking analyst and equity research analyst, he’s held positions in sales and marketing at institutional investment firms, including William O’Neil & Co., TDAmeritrade, and Merrill Lynch.

David now serves as the President and Chief Market Strategist of Frazier & Mayer Research, LLC (dba www.TheMarketMonk.com), an independent investment research firm that provides research and analytical services to hedge funds, investment advisory firms, and other investment newsletters.


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Joy Global (JOY), one of the world’s larger manufacturers of equipment for the mining industry, will break out of that trading range within the next two months and trend substantially higher than its current level during the next 12-18 months.
Joy Global, stock price, investment
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2014-52-12
Thursday, 12 Jun 2014 03:52 PM
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