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How Joy Global Is Trying to Stop Bleeding Revenues

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Nov. 20 2020, Updated 10:50 a.m. ET

Joy Global’s revenues so far

Joy Global’s (JOY) fiscal 1Q16 revenues came in at $526 million, which represents a 25% decline over fiscal 1Q15. The company’s 1Q16 revenue was unfavorably impacted by $31 million in foreign currency exchange losses, a $4-million decline in original equipment, and a $27-million decline in service sales. JOY’s financial year ends in October.

In fiscal 2Q16, JOY’s 2Q16 revenues came in at $602 million, which represents a 26% decline over 2Q16. Fiscal 2Q16 revenue was unfavorably impacted by $24 million from foreign currency exchange losses, a $35-million decline in original equipment, and a $22-million decline in service sales.

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Joy Global’s earnings so far

In 1Q16, JOY’s EPS (earnings per share) were unfavorably impacted from subdued mining activities due to weakening commodity prices. The company’s order inflow has been adversely impacted by this trend, particularly in US coal and copper markets.

In 2Q16, JOY’s adjusted EPS from continuous operations were favorably impacted by restructuring activities. The company’s management said that its is aligning its current workforce and overall cost with anticipated future demand.

Joy Global to focus on balance sheet

Despite its operating losses, JOY was able to report positive cash generation from continuing operations. This capability was primarily driven by the company’s reduced working capital requirement, and it clearly shows management’s effort toward balance sheet consolidation in a challenging environment.

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Reduced capex and share repurchases

JOY has sharply cut down its capital expenditure, or capex, which was $12 million in fiscal 2Q16 and $8 million in fiscal 1Q16, as compared to $71 million in fiscal 2Q15 and $22 million in fiscal 1Q15. The company’s capital expenditure consists of general maintenance a buildout of the service facility in Eurasia. For fiscal 2016, JOY expects its capex to be ~$70 million.

During the past two years, Joy Global has repurchased 9.8 million shares worth $533 million. However, the company did not repurchase shares during last two quarters of its current fiscal year.

In 1Q16, JOY proactively amended its credit facility to strengthen its financial stability and flexibility, which appears to be a precaution amid the current global commodity slump scenario. At the end of 1Q16, JOY should be able to amend its covenants comfortably.

ETF investments

Notably, JOY is a part of the Guggenheim S&P Mid-Cap 400 Pure Value ETF (RFV), accounting for 3.4% of the fund’s total holdings. Talen Energy (TLN), United States Steel (X), and KB Homes (KBH) are also among RFV’s top ten holdings, accounting for 3.1%, 2.6%, and 2.2%, respectively, of the fund.

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