UBS Cuts Price Target on Joy Global (JOY) to $20 as Company Takes Initiatives to Manage Downturn

UBS reiterated a Neutral rating on Joy Global (NYSE: JOY), and cut the price target to $20.00 (from $40.00), as the company takes initiatives to catch up with deteriorating demand.

Analyst Steven Fisher commented, "North American coal was the biggest driver behind surprisingly low Service bookings, in both Underground and Surface segments. Management noted a goodwill impairment in Underground may be imminent, but at this stage it is too early to quantify. Management is focused on keeping leverage at 2x, and with an impairment likely, noted its priority for cash is debt repayment, rather than share repurchases. JOY noted it will take additional measures to improve efficiency and streamline its footprint, targeting over $60m in cost takeouts that should help achieve its 34% decremental op margin goal. JOY is also targeting a working capital/sales ratio in the mid 30s, down from 41% currently, although this is a longer-term target (not FY16). Management believes its actions can lift its capacity utilization from ~50% to ~75%. JOY noted its US coal and OE operations remain profitable, albeit at lower levels."

For an analyst ratings summary and ratings history on Joy Global click here. For more ratings news on Joy Global click here.

Shares of Joy Global closed at $18.90 yesterday.

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