Joy Global's ride far from over

The mining-equipment maker beats expectations and raises guidance.

By Jim J. Jubak Dec 16, 2010 4:08PM
Jim JubakJoy Global (JOYG) beat expectations by 23 cents a share in its fourth quarter, reporting quarterly earnings of $1.39 a share Wednesday. Revenue of $1.05 billion, up 9% from the fourth quarter of fiscal 2009, beat projections of $920 million.

Moving to the world of "That’s nice, but what have you done for me lately?" the mining-equipment maker raised earnings guidance for the fiscal year ending in October 2011 to $5 to $5.30 per share, up from the previous guidance of $4.10 to $4.15. (The Wall Street consensus was at $4.79 before the report.) Joy Global raised its revenue to $3.9 billion to $4.1 billion from its previous projection of $3.86 billion.

Frankly, that guidance still sounds conservative to me. Bookings in the fourth quarter grew by 48%, and the order backlog climbed to $1.8 billion from $1.5 billion as of October 30, 2009.   

The global mining industry is raising capital spending budgets for 2011 and beyond as fast as it can to fill an anticipated gap between supply and demand. A survey of global mining executives
by the Financial Times puts mining capital spending at $115 billion to $120 billion in 2011. That would be a new record, surpassing the peak of $110 billion set in 2010.

The stock climbed 8% on Wednesday on the news to a high of $86.95 before pulling back a bit. That high put the price at 16.4 to 17.3 times the company’s guidance for fiscal 2011. That’s not expensive, considering the company’s guidance works out to earnings growth of 13.7% to 20.5% in fiscal 2011. And, of course, shares are even less expensive if you think, as I do, that the company’s guidance is low.

Think I’m going to keep these shares in my Jubak Picks 50 long-term portfolio when I do my annual drops and adds to that group of stocks in early January? You bet.

And if I can get a decent entry price on these shares, I might even add them to my Jubak's Picks 12-18 month portfolio; $80 a share would be a good entry point.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Joy Global as of the end
of November. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 



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