Joy Global Inc. (JOY:US), the maker of P&H and Joy mining equipment, cut forecasts for full-year earnings and revenue as mining companies ease capital expenditure amid concern over the slowdown in China. The shares fell.
Profit will be $7.15 to $7.45 a share on sales of $5.5 billion to $5.7 billion for the fiscal year through October, the Milwaukee-based company said today in a statement. In February, Joy had projected (JOY:US) earnings of $7.40 to $7.80 on revenue of $5.6 billion to $5.8 billion. The average of analysts’ estimates compiled by Bloomberg were for per-share profit of $7.65 and sales of $5.72 billion.
“Joy’s performance was solid, but cyclicality is overwhelming a good operating story,” Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York, said in an e-mailed response to questions. “With cyclicality, I mean the combination of low natural-gas prices and a slowing China, which is dragging coal demand down.”
Commodity prices have declined 16 percent from this year’s high in February, according to the Standard & Poor’s GSCI Spot Index of 24 raw materials. BHP Billiton Ltd. (BHP), the world’s largest mining company, said May 15 that it will fall short of its $80 billion capital-expenditure target over the next five years as it sees commodity prices declining.
Net Income Rises
Net income in the quarter, which ended April 27, rose 32 percent to $213.6 million, or $2 a share, from $162 million, or $1.52, a year earlier.
Profit excluding a loss from discontinued operations was $2.04 a share, beating the $1.96 average of 18 analysts’ estimates. Sales increased 45 percent to $1.54 billion, exceeding the $1.44 billion average of 14 estimates.
“Even though there is upside to the current market conditions, the continuing uncertainty will keep mining companies cautious,” Chief Executive Officer Mike Sutherlin said in the statement. “International mining houses are shifting their focus away from the next round of greenfield plants to finishing the projects already under way and to pursuing smaller brownfield expansions that have lower risk and quicker returns.”
Joy dropped 5.1 percent to $55.86 at the close in New York. Caterpillar Inc. (CAT:US), the world’s biggest maker of mining equipment, fell 2.8 percent to $87.62.
Joy’s equipment orders declined 62 percent in the fiscal second quarter from a year earlier primarily due to a weak U.S. coal market, the company said in the statement today.
“Joy management’s tempered near-term outlook on lower U.S. coal production and some expected delays in international projects coming online are likely to pressure shares of Caterpillar this morning -- although U.S. coal is a much smaller part of Caterpillar’s overall business,” Stephen Volkmann, a New York-based analyst for Jefferies & Co., said in a report today. He has a hold rating on Joy and a buy rating on Caterpillar.
Joy’s second-quarter bookings fell 19 percent to $1.23 billion. Bookings for Joy’s mining equipment dropped 34 percent to $1.01 billion.
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