Mining equipment major Joy Global (JOY, Financial) reported its fourth-quarter results of this fiscal year on December 17 and surprised investors and analysts by performing better than expected in the fourth quarter, though the numbers grossly fell below those recorded in the same quarter last year. While the mining industry continues to face headwinds as far as its growth is concerned, Joy Global’s optimistic numbers would surely soothe its investors to a considerable extent. Let’s dive in and find out the key highlights of the quarter, and what the management has forecasted regarding the near future.
Numbers show signs of optimism
The equipment maker’s fourth quarter net income came at $136.9 million or $1.38 a share, compared to the $26.8 million or $0.25 a share in the comparable quarter last year. Barring the effect of net discrete tax benefits, earnings per share stood at $1.25 a share for the fourth quarter compared to $1.11 a share the year-ago. In fact, the earnings also surpassed the analysts’ expectations that were hooked to $1.15 per share for the quarter. To be noted is that the analysts’ estimate did not include any special items.
Consolidated net sales stood at $1.13 billion, outpacing the analysts’ consensus estimate of $1.05 billion for the quarter. However, the net sales stood 4% down from $1.18 billion recorded in the year-ago period. This was chiefly attributed to the 27% decline noticed in consolidated bookings to $783 million, while service bookings dropped 9% to $647.8 million.
Due to the slump in the mining industry, original equipment bookings slipped 63% while bookings for underground mining machinery dropped 36% year over year and bookings for surface equipment declined 15%.
The slump also led to the reduction of the order backlog which stood at $1.3 billion at the end of the final quarter of the fiscal year, versus $1.5 billion at the beginning of the year.
Cash position remains solid
Cash provided by continuing operations fell to $65 million this quarter from $195 million in the year-ago quarter. Cash and cash equivalents as per October 31 stood at $270.2 million compared to $405.7 million recorded a year earlier. However, the company continues to keep its investors well rewarded with dividends and share repurchases.
During the quarter, Joy Global repurchased around 1.2 million shares of its common stock for $75 million.
CEO Ted Doheny stated during the earnings call, “The Joy Global team executed very well and delivered full-year results in line with expectations in what was one of the more challenging years in the company's recent history… While difficult commodity market conditions persisted across the year, our team remained focused on improving the company's cost position and responding to our customer's requirements with superior service.”
Outlook looks pretty weak
As Joy Global operates in a commodity surplus market, it might not see bright days in the year ahead. As commodity prices are already under pressure, miners are already too cautious about developing new projects. As a result, mining capital expenditure is moving towards all time low and further declines are being expected in fiscal 2015.
Such an event does not bode well for companies like Joy Global which depends on its thermal and metallurgical coal customers for generating the bulk of its revenue during a quarter. Thus, the management has forecasted weaker sales in the year ahead as the softness in the coal market is expected to hurt Joy Global’s future prospects.
The management forecasts that in the coming fiscal year, the total revenue would be in the range of $3.6-$3.8 billion and earnings are projected to be in the band of $3.10-$3.50 a share.
To conclude
Joy Global is currently under immense pressure as the mining industry is not showing any signs of revival, and the present perils are expected to be carried forward to the coming year as well. But the management is opting for cost optimization and is reducing its capex to generate decent top and bottom line in the near future.
