Joy Global (JOY) Reports In-Line Q4 EPS

Joy Global (NYSE: JOY) reported Q4 EPS of $0.17, in-line with the analyst estimate of $0.17. Revenue for the quarter came in at $656 million versus the consensus estimate of $666.9 million.

"In late fiscal year 2016, we saw the beginning of global commodity markets rebalancing as supply surpluses started to be absorbed and pricing improved from decade low levels," said Ted Doheny, President and Chief Executive Officer. "Despite these improvements, the mining industry continues to defer capital and maintenance spending, which is reflected in our quarter and full year bookings levels, although the year-over-year rate of decline in service bookings has lessened. Our team once again delivered financial results in line with our expectations, with continued solid cash generation, cost reduction ahead of target and steady advancement of our growth strategies."

Company Review and Outlook

"Despite the continued market headwinds, we were able to achieve a number of important operational and strategic objectives over the course of 2016," continued Doheny.

"Driving a company with world-class safety performance remains one of our core values. During the year, we had 15 facilities around the world that achieved zero-incidence rates for the entire year, a 25 percent improvement from 2015. Additionally, our company-wide recordable incident rate was under 1.0 for the entire year; a company record.

"Early fiscal 2016, we experienced another significant step-down in the U.S. and China coal markets, which necessitated further strategic and proactive cost reduction actions to structurally position the business for profitable future growth and positive cash generation. We accomplished these objectives over the course of the year, achieving over $100 million of year-over-year cost reduction, a decremental margin of 31 percent, ahead of our 34 percent target, and over $260 million of total cash generation. At the same time, in the China market, we re-focused the business on customers who value our differentiated equipment and service offerings and are best positioned for success in this market over the coming years.

"We are committed to strategic growth and market penetration into the industrial minerals and tunneling markets. We are now realizing approximately 50 percent of our business coming from non-coal markets. By demonstrating our product differentiation and lowest total cost of ownership, we were able to gain market share by converting several mine operations from traditional drill and blast to our high-productivity continuous mining methods. This strategic focus led to multiple orders of heavy continuous miners and flexible conveyor trains.

"We remained focused on our new product development growth strategies in our service business including consumables and continued market penetration in hard rock. During 2016, we made significant advances with our hybrid shovel, underground hard rock Joy SR Hybrid Drive LHDs and prototype DynaCut™ hard rock continuous mining system. These products have all been in the field for well over a year proving their capabilities. The hybrid shovel and LHDs are now commercially available and the DynaCut™ system is set to go to market in the next few years. Additionally, despite the market step-down and reduction of our active fleet of equipment, we achieved growth in our consumables offerings and expect to see stronger growth rates as new equipment bookings increase when the industry recovers over the next 12 to 18 months.

“Although some commodity prices have recovered in recent months, our customers remain cautious and are very selective with capital deployment, which will continue to impact the timing and level of incoming orders, and lead to the expected fifth consecutive year of decreased capital expenditures for the industry. We will continue to manage operational and working capital efficiencies and advance our growth strategies in fiscal 2017."

For earnings history and earnings-related data on Joy Global (JOY) click here.

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