Joy Global surprises with quarterly profit, shares jump

Shares in mining equipment maker Joy Global (NYSE:JOY) soared Thursday morning after the company posted a surprise quarterly adjusted profit on the back of a modest increase in service sales and aggressive cost cuts.

The stock was up 8.6% at $18.13 at 10:12AM EDT, even though the Wisconsin-based company said it now expects 2016 sales to be at the lower end of a previous outlook of $2.4 billion to $2.6 billion.

Adjusted earnings are also expected to be at the bottom end of a previously announced range of 10 to 50 cents per share.

Joy Global, which gets more than half of its revenue from coal miners, has been specially hit by weak demand from its US-based customers.

Joy Global, which gets more than half of its revenue from coal miners, has been specially hit by weak demand from its customers.

In fact, the company reported a loss from continuing operations of $15.3 million, or 16 cents per share, for the latest quarter, compared with a profit of $56 million, or 57 cents per share, a year earlier.

Still, the recent results surpassed Wall Street expectations, and Joy Global executives expressed some optimism even as the company has taken severe measures to cuts costs in recent quarters, including closing some operations and laying off hundreds of workers in Milwaukee.

"Some positive signs have emerged in recent months; however, the mining industry continues to face headwinds from oversupplied commodities and reduced cash flows for most producers," President and CEO Ted Doheny said in a statement.

"We are now targeting over $100 million of year-over-year cost reductions in fiscal 2016," he added.

Not out of the woods just yet

Underground mining equipment sales dropped 17%, from $438 million a year ago to $362 million, while surface mining equipment orders fell 1% from $344 million to $340 million.

Service bookings were down 14% and OEM bookings were up 12%, Joy said.

Backlog at the end of the quarter totalled $976 million, up from $873 million at the beginning of the fiscal year.

The giant shovels, conveyor belts and jumbo drills manufacturer also said it expects copper prices to remain around current levels for the rest of 2016, a larger-than-anticipated decline in US coal production, a rebalancing market for steel and iron ore prices in a range of $45 to $50 per metric ton.