Joy Global (NASDAQ: JOYG) makes heavy equipment for the mining industry through two subsidiaries, Joy Mining Machinery and P & H Mining Equipment.
JOYG is well-positioned to benefit from two global trends that show little sign of ending: infrastructure development (which requires copper, among other commodities) and energy usage (which requires increased use of coal for electric power generation.)
Analysts like JOYG's sector-leading high-teens margins, superior management team, and revenue mix that tilts toward its lucrative aftermarket parts and service business. In addition, it appears that 2007's supply chain issues have been addressed and resolved.
Further, Joy Global lives up to its name: more than 70% of revenue is outside the United States -- no small advantage, given the current status of the U.S. economy. The Reuters F2008/F2009 EPS consensus estimates for JOYG are $3.40/$4.18.
The risks? Analysts are keeping an eye on commodity costs, particularly copper. Prices are favorable for JOYG's business, but concern is growing that commodities demand may slow if prices continue to increase at double-digit rates.
The First Call mean rating for JOYG is Buy (13 firms). The mean 2008 target is $79. (high: $100, low: $70).
Stock Analysis: Joy Global is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from JOYG's shares. If you were to purchase shares in this company, consider a stop loss of $42.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
Comfort Zone Investing: The unmighty dollar
Five winners of a weak dollar
For a quick-read on the U.S. economy, check the price of gasoline
