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Stabilizing mining equipment sales herald better days for Caterpillar, Joy

  • Fundamentals are stabilizing for mining equipment companies such as Caterpillar (CAT) and Joy Global (JOY) even if the industry isn’t out of the woods yet, Deutsche Bank's Vishal Shah says.
  • A number of leading indicators point to stabilizing mining equipment sales and the absorption of excess capacity: equipment destocking at mines is expected to be completed by year-end and excess capacity for CAT is 10%-15%, dealer inventories are largely normalized, fleet utilization at mining equipment rental company Emeco has bottomed and begun to recover, and bidding activity for operations and maintenance work for contract miners has improved.
  • Shah says JOY should benefit once the cycle turns, but he prefers CAT, which has “a more favorable risk/reward” despite gaining 13% YTD.
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