CHICAGO, Sept. 1, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: Joy Global Incorporation
(Nasdaq: JOYG), Rowan Companies Inc. (NYSE: RDC), Cameron
International Corporation (NYSE: CAM), Caterpillar Inc.
(NYSE: CAT) and ADP's (Nasdaq: ADP).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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Here are highlights from Wednesday's Analyst Blog:
Joy Global Beats EPS, Ups Guidance
Joy Global Incorporation (Nasdaq: JOYG) reported adjusted
earnings of $1.54 per share in the
third quarter of fiscal 2011 ending July
29, compared with $1.11 per
share in the year-ago quarter. The results of the company also
surpassed the Zacks Consensus Estimate of $1.50 per share. Adjusted earnings increased 49%
year over year to $163.5 million in
the quarter under review.
Adjusting for earnings accretion from LeTourneau Mining
Equipment acquisition, net of tax, of 4
cents, discrete tax benefit of 11
cents, acquisition cost, net of tax, of 8 cents and discontinued operations of
1 cent, the company reported earnings
of $1.62 per share, compared with
$1.13 per share in year ago quarter.
Net income was $173.1 million
compared with $118.5 million in the
year ago quarter.
Operational Update
Joy Global reported net sales of $1.09
billion in the reported quarter, up 28.6% from $0.9 million in the year-earlier period. The
growth was driven by higher contribution from Underground Mining
Machinery (up 31%) and Surface Mining Equipment (up 24.5%), while
eliminations were a marginal drag on total revenue. Sales, however,
fell short of the Zacks Consensus Estimate of $1.15 billion.
Including contributions from recently acquired LeTourneau Mining
Equipment business, sales grossed $1.14
billion, up 33% year over year.
Booking in the third quarter of fiscal 2011 grew 46% year over
year. Original equipment bookings surged 78%, while aftermarket
orders increased 22% from year ago level. The third quarter
bookings included a benefit of $79
million from changes in foreign exchange rates.
Cost of sales climbed 32% to $739.6
million from $560.2 million a
year ago. Similarly, selling and administrative expenses of
$165.3 million rose 40% from the
previous year.
Adjusted operating income grew up 20.3% year over year mainly
attributable higher sales volume, favorable price realization and
favorable manufacturing overhead absorption, partially offset by an
increase in selling, engineering and administrative expenses.
Including contributions from recently acquired LeTourneau Mining
Equipment business and acquisition cost, the company reported
operating income of $236 million in
the quarter.
Interest expenses during the quarter were $6 million, up from $4
million reported in the comparable quarter last year.
Financial Update
Cash and cash equivalents of Joy Global as of July 29, 2011, were $443.1
million versus $815.6 million
as of October 29, 2010.
Cash provided by operating activities was $96.3 million in the third quarter of fiscal 2011
versus $294.9 million in the third
quarter of fiscal 2010. The decline is attributable to increase in
inventories, partially offset by an increase in advanced
payments.
Capital expenditure at Joy Global for the third quarter was
$22 million, up from $19 million spent in the year-ago quarter. For
the full year, capital expenditure is expected to be $120 million.
Looking Forward
Taking into account the strong market fundamentals, improved
throughput from Operational Excellence and synergies from
acquisitions, Joy Global raised its total revenue expectation for
2011 to $4.3–$4.5 billion from
$4.1–$4.1 billion for fiscal 2011.
The guidance includes contribution of approximately $150 million from the LeTourneau mining equipment
business.
The company also raised its earnings per share guidance for 2011
to a range of $5.70 to $6.00 from
$5.30 to $5.60. The guidance includes
10 cents accretion from LeTourneau's
mining equipment business, net of 4
cents of inventory purchase accounting charges. It also
takes into accounts 11 cents discreet
tax benefit realized and 12 cents of
acquisition transaction costs incurred in the third quarter.
Asset Repositioning
In the quarter, Joy Global closed the acquisition of LeTourneau
Technologies Inc. from Rowan Companies Inc. (NYSE: RDC) for
$1.1 billion in cash. The company had
agreed to buy Rowan's LeTourneau assets in May 2011.
The company also entered into an agreement with TJCC Holdings
Limited to purchase 534.8 million shares of International Mining
Machinery Holdings Ltd. (IMM) representing 41.1% of the shares
outstanding. It further purchased approximately 136.5 million
shares of IMM in the open market at a price of HKD 8.00 per share. The number of shares bought
represents 10.5% of the total shares outstanding. Together with the
latest open market purchase, Joy Global's stake in IMM aggregates
to 51.6% of shares outstanding.
Subsequent to the reported quarter, Joy Global entered into an
agreement to divest LeTourneau Technologies Drillings Systems and
Offshore Products to Cameron International Corporation
(NYSE: CAM) for $375 million in cash.
The transaction is scheduled for completion in the fourth quarter
of 2011.
Peer Comparison
Joy Global competes head-to-head with the industry behemoth
Caterpillar Inc. (NYSE: CAT). Caterpillar's second-quarter
adjusted EPS was $1.72, surged 58%
over the prior year quarter. However, results failed to meet the
Zacks Consensus Estimate of $1.77 per
share.
Sales, which grossed $14.23
billion in the quarter, jumped to an all-time quarterly
record due to increased machine demand and continued economic
growth.
Our View
The company ended the third quarter of 2011 with a backlog of
$3.20 billion versus $2.63 billion in the first quarter of 2011 and
$1.82 billion in fiscal 2010.
It is encouraging to note that backlog has grown for both
Underground Mining and Surface Mining equipment suggesting
all-round growth in the mining sector.
We expect initiatives taken by the company to improve all areas
of business through its Operational Excellence programs and the
mine expansion plan that should help it to reach the updated
guidance level. Also, the acquisition of LeTourneau Technologies
Inc. is already accretive to the earnings of Joy Global.
Furthermore, the company's 51.6% stake in China based International Mining Machinery
Holdings Ltd. will help it in procuring leading positions in each
of the major segments of the Chinese market.
We retain our Outperform recommendation on Joy Global. The
quantitative Zacks #2 Rank (short-term Buy rating) for the company
indicates upward pressure on the shares over the near term.
ADP Reports 91K New Jobs in August
ADP's (Nasdaq: ADP) employment numbers missed slightly
this morning. The biggest private-sector check-cutter reported a
gain of 91,000 jobs in August, down from an expected level of
100,000 jobs gained. The ADP is the premiere jobs report prior to
this Friday's Bureau of Labor Statistics (BLS) non-farm payroll
report, and this moderate miss may ding expectations for Friday's
numbers.
Also, July's numbers were revised down from 114,000 new jobs
originally reported to 109,000. So both headline numbers represent
a disappointment, although with how expectations are often crushed
in recent months, the market may breathe a sigh of relief that the
numbers weren't worse. In fact, stock futures were up immediately
after the ADP report was announced.
The estimate for Friday's BLS report are now for a gain of
80,000 jobs in August. The main difference between the ADP and BLS
reports is that the ADP does not count government jobs but the BLS
does.
By size of firm, small businesses -- the biggest and most
important private employers in the country -- gained 58,000 jobs
during the month. Medium-sized businesses gained 30,000, and large
businesses were up 3,000. Goods producing jobs were up 11,000,
services were up 80,000 but manufacturing was down 4,000 jobs.
Any way you slice it, this marks further tepid hiring in the
U.S. Not always do the ADP and BLS numbers correlate, but they
usually exist within a range, particularly after revisions in later
months modify the results. An additional 91,000 jobs will not do
much to stave off fears of another recession, but they do at least
provide grist for the mill that we are growing, albeit at an anemic
pace.
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