Update: Lower Earnings And Muted Outlook Makes Joy Global A Risky Play

| About: Joy Global (JOY)
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Summary

Joy Global announced results for the fiscal 2014.

Its sales and earnings declined sharply in the past year.

Business environment will remain challenging for the company in the coming days.

It is not an attractive pick.

Joy Global (NYSE:JOY) announced poor results for the fiscal 2014. The company's sales and earnings declined sharply in 2014 compared to 2013. Its net sales declined to $3.8 from $5B in the past year, a fall of around 25%. In addition, Joy's earnings per share is also following a similar trend, declined to $3.28/share, compared to $4.99 a year ago. Although, it is strongly working on saving costs and lowering capital expenditure, cash flows are still falling with the fall in earnings. It operating cash flows declined to $368 million compared to $637 million in the past year.

In the mid of September, I recommended investors to stay away from this stock when Joy's stock price started to fall. I had predicted that its share price may fall sharply in the coming days due to the expected poor financial performance. Joy Global is a manufacturer and a services provider to the mining and minerals industry. Over the past few years, mining and minerals industry has been facing strong volatility in the commodities prices, which is hurting their growth strategies and capital expenditures. Mining and minerals companies are aggressively working on lowering their capital requirements in order to give a boost to cash flows. Consequently, Joy Global is also been experiencing lower order booking for its products and services.

Therefore, I recommended investors not to buy this stock on the dip. Over the past three months, its stock continues to fall, lost more than 21% of value. Continuous fall in its share price and the latest earnings announcement affirmed my recent opinion. Moving on, I believe Joy's stock may continue its selloff on the back of muted outlook. Amid cost cuttings and lower capital spending, the company will post lower results in 2015 based on the lower bookings for its equipments and services.

The company's equipment bookings dropped by 8% and services booking declined by 2% compared to the year ago. In addition, mining and mineral industry continues to lower their capital investments as commodity prices are still falling, which will further impact demand for the equipment and services providers. Hence, I still do not recommend investing in companies that are facing problems in their main product line.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.