joy global

Joy Global(JOYG)

Industrials SectorAugust 23nd, 2009

Kevin Abels

Basic Business Description

Joy Global manufactures mining equipment used to extract coal, copper, and iron ore. Commodity prices directly impact the demand for JOYG’s products and services and over the past five years JOYG has generated approximately 106% revenue growth as commodity prices have soared. Sales of original mining equipment account for approximately 40% of overall revenue with the service division accounting for the other large branch of revenue stream. JOYG is comprised of three market-leading businesses; P&H Mining Equipment, Joy Mining Machinery, and Continental Crushing and Conveying.

•Mkt Cap – $3.94B•P/E (ttm) – 9.28•Beta – 2.38•EPS – 4.15•ROE (Past 3 yrs) – 51%•Headquarters – Milwaukee•Competitors – Bucyrus & Caterpillar

Joy Mining Machinery

•Develops, manufactures, distributes, and services underground mining machinery for the extraction of coal and other bedded materials

•Majority of the equipment operates in underground coal mines, but its equipment is also used to obtain trona, salt, phosphate, gypsum, and oil shale

•Has 46 facilities in 8 different countries around the world. These facilities include sales offices, manufacturing plants, service centers and/or parts warehouses

•Employs approximately 6,100 people around the world

P&H Mining Equipment

•Designs and manufactures electric mining shovels, walking draglines, and rotary blast hole drills for the surface mining industry

•Global operations

•P&H MinePro Services has exclusive rights to distribute and support P&H mining equipment.

•P&H MinPro Services is the distribution and support arm of the company and employs approximately 2,600 people from over 30 locations worldwide

•P&H Mining Equipment as a whole employs around 3,200 people

Continental Crushing & Conveying

•Designs and manufactures Continental conveyor equipment and the Stamler line of feeder-breakers, reclaim feeders, single and double rolls crushers and railroad car spotters

•Focuses on designing efficient conveyor system solutions for the mining and extraction industry

•The new company was formed in 2008 following the acquisition by JOYG

Price Chart

52 Week Range: $14.30– 73.33

Current Price: $39.95

Sales by Commodity & Geographic Region

Joy Global Worldwide locations

Financial Highlights

Operations (in thousand’s) Oct 31, 2008 Oct 31, 2007 % Change

Net Sales $3,418,934 $2,547,332 34.2%

Gross Profit 990,005 826,668 19.8%

Gross Profit Percentage 29.0% 32.5% -

Operating Income 551,204 473,275 16.5%

Operating Income Percentage 16.1% 18.6% -

Other Financial Data

Bookings 4,823,306 2,889,404 66.9%

Backlog 3,174,734 1,637,598 93.9%

Cash Dividends per Share 0.63 0.60 4.2%

Shares Outstanding 102,708 107,683 (4.6)%

Long Term Potential

Business Segments

Industry Notes

•China is driving high commodity demand

•US economy stabilizing

•Inventory reductions ending

•Mining is expected to reach capacity quickly upon the economic recovery

•Solid long-term story – Industrialization of emerging markets

Strengths

•Strong market position – Highly exposed to emerging markets

•Financial stability

•Strong backlogs that extend out for several years

•A majority of revenues come from aftermarket parts and services – Tied to production levels and have been historically stable in economic turmoil

SWOT

Weaknesses

•Majority of revenue is derived from the US market where industrialization is declining

•Financial performance is heavily dependant upon commodity prices – specifically coal, copper, and iron ore

SWOT

Opportunities

• The rapid industrialization of China will drive the need for an increasing amount of commodities such as coal and iron ore

•Other emerging markets

SWOT

• Possible trend of moving toward natural gas to provide energy solutions

• Eventual economic slowdown in China

• New competitors will arise in the emerging markets

• Alternative energy

Threats