Joy Global Earnings Take Back Seat to Pending Merger

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Joy Global Inc. (NYSE: JOY) reported third-quarter fiscal 2016 results before markets opened Thursday. The mining equipment maker reported adjusted diluted earnings per share (EPS) from continuing operations of $0.10 on revenues of $587 million. In the same period a year ago, Joy Global reported EPS of $0.59 from continuing operations on revenue of $792 million. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.12 and $605.32 million in revenue.

On a GAAP basis, Joy posted a break-even quarter, compared with earnings of $0.52 per share in the third quarter of 2015.

Third-quarter adjusted results exclude $24.7 million in restructuring charges and $2.5 million in costs related to the company’s pending merger with a subsidiary of Komatsu. Following the merger, Joy Global will be a wholly owned subsidiary of Komatsu America. Shareholders will receive $28.30 per share in cash in a transaction that is expected to be completed by mid-2017.

In the company’s outlook statement, CEO Ted Doheny said:

While the recent increase in certain commodity prices is positive, the outlook remains tepid and the financial condition of our customers is challenged, which will continue to impact both the timing and level of our incoming orders through 2017.

In light of persistent difficult market conditions, we remain focused on reducing our cost base, accelerating the implementation of our footprint optimization plans and actively monetizing non-core assets. Due to the pending merger transaction with Komatsu America, the company will no longer provide quarterly updated annual financial guidance.

The company also commented on the commodities market:

Despite the headwinds to global growth during the first half of the year, certain commodity prices have recently improved. However, this development has been driven more by supply rationalization as opposed to strengthening demand and should be viewed in that context. As commodity markets continue to rebalance, some volatility in pricing will likely remain as conditions in individual markets vary. Notwithstanding recent modest commodity price increases, the mining industry continues to face many challenges and market conditions are expected to remain weak through 2017. Over the past quarter, the global mining equipment capital spending outlook has worsened with the current projection for 2017 now reflecting a year-over-year decline in spending approaching 10 percent.

Joy Global’s shares closed down 0.4% on Wednesday, at $27.28 in a 52-week range of $8.35 to $28.55. Shares traded down about 0.3% in Thursday’s premarket session at $27.20.