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Infrastructure work and mining machine provider Bucyrus International (BUCY), which I first wrote about on June 22, 2009 at a price of $25.37, remains a promising business model. Back in June the calculation was that shares of Bucyrus would benefit from the developing world's enormous infrastructure needs, as the global economic recovery commenced. Well, so far, so good. The shares are up more than 100% in less than a year, and there's more upside ahead.
In 2009, Bucyrus agreed to purchase the mining business of Terex Corporation (TEX) for $1.3 billion in cash, a deal, subject to regulatory approvals, that will likely improve BUCY's excavator, rugged haul truck, and drill offerings. That fact, combined with improving equipment, parts replacement, and service orders should push revenue up 2-4% in 2010, and another 5-7% in 2011.
Further, while there is some climate change risk depending on what happens to coal's status, investors should keep in mind that BUCY's equipment is also used to mine copper, and in oil sands operations.
The First Call FY2010/FY2011 EPS estimates for BUCY are $4.02 to $4.93. Each looks about 5% low, according to my analysis.
Technically, Bucyrus'chart is strong -- an uptrend. There is the risk of a short-term double top, but the view from here argues, the uptrend is stronger and will prevail.
2010 Outlook: I view Bucyrus as a long-term play, but if investors are looking to sell BUCY within the year, it's probably best to take your profits after it rises to $69-70, if it fails to rise above $71.
Stock Analysis: I consider Bucyrus International to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in BUCY now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my BUCY position before April 2010 and I'd put a sell/stop loss at: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Further, while there is some climate change risk depending on what happens to coal's status, investors should keep in mind that BUCY's equipment is also used to mine copper, and in oil sands operations.
The First Call FY2010/FY2011 EPS estimates for BUCY are $4.02 to $4.93. Each looks about 5% low, according to my analysis.
Technically, Bucyrus'chart is strong -- an uptrend. There is the risk of a short-term double top, but the view from here argues, the uptrend is stronger and will prevail.
2010 Outlook: I view Bucyrus as a long-term play, but if investors are looking to sell BUCY within the year, it's probably best to take your profits after it rises to $69-70, if it fails to rise above $71.
Stock Analysis: I consider Bucyrus International to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in BUCY now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my BUCY position before April 2010 and I'd put a sell/stop loss at: $27.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
3-11-2010 @ 4:53PM
MyKisa said...
....we don`t need no stinkin mining equiptment....we want green....500 years worth of coal in the ground can just sit there another million years..