Joy Global Inc. (JOYG) reported adjusted earnings of $1.13 per share in the third quarter of fiscal 2010, compared with $1.21 per share in the year-ago period. EPS in the quarter came in 10 cents higher than the Zacks Consensus Estimate of $1.03.
Operational Update
Joy Global’s net sales of $850 million were slightly below the Zacks Consensus Estimate of $875 million. The company’s sales in the quarter declined 11% year over year primarily due to lower original equipment sales in the underground equipment business.
Surface equipment sales in the quarter rose 2%, with aftermarket sales up 4% and original equipment sales substantially flat with the prior year’s quarter. The increase in aftermarket sales was due to increased shipments in North America and Australasia, partially offset by decreased activity in China, due to timing.
However, underground equipment sales in the second quarter dipped 18%, with aftermarket up 8% primarily due to increased parts sales and machine rebuilds. This was offset by a $134 million decline in original equipment sales.
By product, original equipment revenue was down 28% on a year-over-year basis, while the aftermarket revenues were up 5% from the year-ago period.
Joy Global’s operating profit in the current quarter was $172 million versus $195 million in the year-ago period. Operating margin in the quarter remained flat from the third quarter of 2009 at 20%. The positive impact from the manufacturing and supply variances and the benefits of the
2009 cost reduction programs more than offset the negatives like lower sales volumes, and higher pension and product development expense.
Higher New Order and Backlog
Joy Global received new orders worth $973 million in the third quarter, a growth of 51% from $644 million in the third quarter of 2009. The year-over-year increase in order was driven by the doubling of the original equipment orders and a 20% spike in aftermarket orders over the third quarter of last year.
Backlog increased to $1.8 billion at quarter-end from $1.5 billion at the end of fiscal 2009. The increment in backlog was due to strong bookings in 2010 for both divisions.
Financial Condition
Cash and cash equivalents of Joy Global were $748.6 million versus $471.7 million at fiscal year-end 2009.
Cash provided by operating activities was $204.9 million in the current quarter compared with $186.5 million in the comparable period last year. The cash flow during the quarter was positively impacted by an increase in advance payments on new original equipment orders, mostly in the underground business, partially offset by increased inventories associated with delays in original equipment shipments.
Joy Global incurred capital expenditure of $19 million, compared with $17 million in the year-ago quarter.
Guidance
Although Joy Global expects some near-term uncertainty, it is confident that industry fundamentals will lead to a robust demand over the longer term. The company’s revised full-year revenue guidance lies within the range of $3.35 to $3.4 billion, compared to the previous guidance of $3.3 billion to $3.4 billion. Joy Global expects full-year earnings per share to range within $4.10 to $4.15, up from the previous expectation of $3.85 to $4.00 per share. The Zacks Consensus Estimate for Joy Global is $1.10 for the third quarter and $4.01 for the full-year 2010.
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