Bloomberg News

Joy Global Falls on ‘Sluggish’ Near-Term Commodity Demand

December 14, 2011

(Updates with closing share price in second paragraph.)

Dec. 14 (Bloomberg) -- Joy Global Inc., the maker of P&H and Joy mining equipment, fell the most in more than two years after projecting that demand for commodities will remain slow in the near term.

Joy Global dropped 11 percent to $75.44 at the close in New York, the biggest decline since Feb. 23, 2009.

Net income rose 18 percent to $172.3 million, or $1.61 a share, in the quarter ended Oct. 28, from $146.3 million, or $1.39, a year earlier, the Milwaukee-based company said today in a statement. Sales increased 27 percent to $1.34 billion from $1.05 billion, $10 million lower than the $1.35 billion average of 11 analysts’ estimates compiled by Bloomberg.

“Management expects sluggish growth until the global macro environment improves,” Ann Duignan, a New York-based analyst at JPMorgan Chase & Co. who rates the shares “neutral,” said in a report today.

Commodity demand is connected to economic trends, and slowing global growth is tempering demand, the company said in the statement.

“We expect demand to grow at a more moderate rate in 2012, and our focus will be on long-term growth and efficiencies,” Chief Executive Officer Mike Sutherlin said in the statement. “Consistent with the outlook of current sluggishness leading to the return of strong growth, we will continue to move ahead with our capacity upgrades and expansion plans to meet the long-term needs of our customers.”

Falling Inventories

Recent destocking of commodities such as copper and coal have reduced import demand by China and India and will set the stage for eventual restocking, Sutherlin said.

The company’s “tone change is really around the fact that the situation we have today between customer commitment to capital expenditures and the macro environment is not sustainable over the longer term,” Sutherlin said in a call with analysts today.

Joy Global’s fiscal fourth quarter “was solid and largely in-line with consensus expectations on most metrics” while investors were looking for “slightly more bookings and revenue,” Andy Kaplowitz, a New York-based analyst for Barclays Plc who has an “overweight/positive” rating on the shares, said in a report.

“Mining equipment markets are slowing, at least temporarily, but should remain solid over the longer term,” Kaplowitz said. “We would recommend buying Joy shares on weakness.”

Excluding expenses related to the purchase of LeTourneau Technologies Inc., which Joy acquired in June, and other items, earnings were $1.90 a share, topping the $1.86 average of 18 estimates compiled by Bloomberg.

--Editors: Steven Frank, Jessica Resnick-Ault

To contact the reporter on this story: Shruti Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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