Joy Global (JOY, Financial) continues to demonstrate operation efficiencies, despite not so friendly market and economic conditions. Its strategic plans are better placed to tackle such hitches and delivering consistent returns to shareholders. It is focusing on providing full system service to its customers across the world with lowest total cost of ownership. This should not only assist the company to better fight with such circumstances, prevailing in the industry but also effectively encounter the challenges of low commodity prices. Let us look at its key positive trends and growth drivers that could possibly boost its earnings performance ahead.
Investment in projects and services
Joy is consistently focusing on the research and development projects on the most compelling solutions that should assist the company to minimize costs and accelerate production as well as to have effective safety measures for the mine operations. The company expects these strategic moves of product and system development to create incredible growth opportunity in the future.
In addition, the company should gain from its newly acquired MIT business. It remains upbeat to fully integrate this business into rock solid mining product portfolio. Further, the company plans to expand its underground product portfolio into hard rock mining space. This acquisition along with product development projects should enhance its performance going forward.
Also, the company is aggressively working on its service commitment to its customers. Joy remains committed to ensure highest utilization and efficiency of its equipment and the system. Therefore it is cleverly investing in its service capabilities across the world. It has recently inaugurated a new service center in Australia and almost done with the completion of state-of-the-art facility in Russia and Peru. These service centers will not only better enable the company to handle both surface and underground equipment but also to enhance its ability to service its fleet of equipment.
Joy Global should certainly be pleased with its service bookings that increased 7% during the third-quarter. The company has observed impressive 6% growth in its service bookings this year as against the last year. It is also seeing strength in its service sales due to due to delay in maintenance and rebuilding activities of coal companies. The company expects its service booking to grow in fiscal 2015 as well that is pretty positive sign for the shareholders.
Improving global market condition to foster its growth
Joy Global should benefit from the recovering global market conditions. It expects the global growth to surpass 3.5% this year. The multiple efforts are expected to revive growth in China that had start up and stops of growth. The company projects 7% plus growth in China that should undoubtedly drive demand for commodity in the region. However, the manufacturing and infrastructure conditions have slowed down once again in China that could pressurize its earnings performance this year.
In addition, the global steel production is expected to grow 3% to 4% this year. This significant rise in growth should alleviate demand that continues to remain low due to oversupply. Also, Joy sees pressure on global iron ore prices due to ramp up of production in Australia in already in over supplied market.
Nevertheless, the company is working close with its customers across the world in order to lower their cost of operations and shift their cost curve position. This should positively assist Joy to improve its results amidst the tight economic environment.
Soft guidance
Joy Global has provided soft guidance for the full year. It expects its net sales to grow in the range of $3.65 billion to $3.75 billion. It has narrowed its sales outlook by $50.0 million on each side. Also, its earnings are expected to range between $3.15 and $3.30 per share from previously stated range of $3.10 per share to $3.50.
Final take and fundamentals
Joy is investing in product and service enhancement. Also, the global growth is improving that will certainly augment its performance in the future. The analysts expect its earnings to grow at CAGR of 12.60% for the next year. Moreover, the stock share cheap valuations with the trailing P/E of 23.45 and forward P/E of 14.05. It has profit and operating profit margins of 5.77% and 13.19% respectively for the trailing twelve months. Its balance sheet carries total cash of $308.04 million and has total debt of $1.27 billion. It has operating cash flow of $493.49 million and leverage free cash flow of $351.72 million.
