In spite of global economic risk, Joy Global's (JOY) expansion into emerging markets, will to help create a strong fiscal year 2012.
For the first quarter ending January 27th 2012 , Joy Global reported a net sales $1.136 billion. This was an 30.7% increase over Q1 a year ago, when Joy Global reported worldwide net sales $896.5 million. This increase was due to the original equipment sales in both the underground and surface mining segments being especially strong. Sales in both segments were up a total of 37% over Q1 a year ago and aftermarket sales in both segments were up a total of 10% over the Q1 a year ago.
The underground mining machinery segment or Joy Mining Machinery had an increase in sales of 23.1%. Sales went from $510.9 million in Q1 2011 to $628.8 million in Q1 2012. The sales of underground original equipment were driven by higher shipments in Australia, the United States and Eurasia, while aftermarket sales were led by China, Australia, the United States and Eurasia.
The surface mining equipment segment or P&H Mining Equipment also reported extensive gains. This segment reported sales of $454.0 million in Q1 2012, which was a 17.7% increase over Q1 a year ago when the company reported sales of $385.8 million. The increased sales of original equipment in the surface mining segment was led by strong shipments in Latin America, South Africa, the U.S. and Canada. Aftermarket sales increased in the United States, Canada and Latin America.
Mike Sutherlin, President and Chief Executive Officer states in the Joy Global Operating report for Q1 2012: "We are very pleased with our first quarter, and it gives us a very strong start to our 2012. Both sales and margins are records for a first quarter. Orders for surface original equipment and for aftermarket parts and services in both segments were especially strong, and in line with the outlook for our markets."
With a strong start in Q1, fiscal year 2012 looks to be strong for Joy Global. With total bookings during Q1 rising by 16.8% to $1.43 billion, Joy Global looks to be in good position to move forward. Original equipment bookings increased $41.6 million or 6.5%, while aftermarket bookings increased $164.9 million or 28.1% in Q1 2012. This increase was due to parts, service and rebuild orders remaining strong across most regions. Even though underground mining machinery bookings fell by 2% to $806.5 million, as a result of a significant Australian booking in the prior year's Q1 that did not repeat in the current year, the surface mining equipment bookings, rose 40.3% to $612.0 million. Total bookings for Joy Global rose by 16.8% over Q1 last year, setting up a positive outlook for fiscal year 2012.
Looking forward into 2012, the company has concerns about global economic uncertainty especially as it relates to China. Rival Companies such as Caterpillar (CAT), John Deere (DE) and Terex Corporation (TEX) will all be greatly impacted by the global economic uncertainties in China and Europe. Investors business daily reported: "Positive news was overshadowed by concerns about slowing China growth." as the article directly relates to Joy Global and Caterpillar. The article also stated "Concerns have been growing that China's once-fire-hot growth is cooling. Some economists fear that a sharp drop in China growth could derail an already tepid U.S. economic recovery." Joy Global has a growing interest in China as stated in the 2011 Annual report: "We expect that the percentage of our sales occurring outside the United States will increase over time largely due to increased activity in China, India and other emerging markets."
In addition to the risk factor listed above, Joy Global has other concerns about international operations, especially as the company looks to expand globally. Joy Global Inc states in the companies 2011 annual report (PDF under 2011 Annual report): "our international operations are subject to various political, economic and other uncertainties that could adversely affect our business. A significant reduction of our international business due to any of these risks would adversely affect our sales. In our fiscal years 2011, 2010, and 2009, approximately 54%, 56%, and 50%, respectively, of our sales were derived from sales outside the United States."
Moving forward, Joy Global Inc has focused on growing its sales outside the U.S. and continuing to expand in emerging markets. Joy Global states:
Joy Global also continues investing to capitalize on the high growth potential in the emerging markets. Our armored face conveyor factory and our shovel transmission factory deliver the best performance and lowest cost in our fleet. In addition, we had record levels of order bookings of our globally branded Joy and P&H equipment from the largest mining customers in China as they continue to realize the greatest value from the world's most productive equipment. And finally, we increased the sales of longwall shearing machines made by our Wuxi Shengda business as legacy mines increase their mechanization. In 2011, we will also make our initial investments to adapt and apply our emerging market strategy to India and Russia.
Even with global economic risk, Joy Global Inc expansion into emerging markets will help the company grow, will aid in creating a strong fiscal year 2012. Joy Global anticipates earning between $7.40 per share and $7.80 per share in 2012 and total sales are expected between $5.6 billion and $5.8 billion for the year.
1. Estimated sales = $5.63 billion
2. Estimated profit margin = 14.7%
3. Earnings = $827.61 million
4. Shares Outstanding = 105.82 million
5. EPS = $7.82
6. Forward P/E = 10.2
Joy - Joy Global Inc Price Target for 2012 = $79.92 USD
|Target||UBS Securities||Neutral||$78.00 « $85.00||03/29/12|
|Target, Downgrade||UBS Securities||Neutral « Buy||$85.00 « $112.00||03/15/12|
|Target||Jefferies & Co||Hold||$64.00||03/02/12|
|Downgrade||Jefferies & Co||Hold « Buy||02/10/12|
|Target||Jefferies & Co||$90.00 « $100.00||02/09/12|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.