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Does the Komatsu Deal Change How Analysts Rate Joy Global?

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Analyst recommendations for Joy Global

Wall Street analysts do not have a very positive view of Joy Global (JOY). Of 19 analysts surveyed by Bloomberg, five gave the company a “buy” rating, while 11 gave a “hold” rating, three gave “sell” ratings. Analysts have given an average price target of $21.8, as compared to the company’s closing price of  $28.2 on July 21, 2016.

The high, low, and median target prices for JOY are $28, $10, and $19, respectively. Notably, Joy Global is a component of the SmallCap Earnings Funds (EES), which has ~1.15% of its total portfolio in the company.

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Joy Global’s ratings prior to the Komatsu deal

Barclays (BCS) gave an “equal-weight” rating on JOY’s stock, with a price target of $28.0 on July 21. This price target implies a 0.7% potential decline over the stock’s close of $28.2 on July 21.

RBC Capital Markets (RBC) gave a “sector performer” rating to JOY, with a price target of $19 on July 19. This price target implies 32.6% potential decline over the stock’s close of $28.2 per share on July 21.

J.P. Morgan (JPM) gave JOY a “neutral” rating, with a price target of $17 on July 19, which implies a 39.7% potential price decline over the stock’s close on July 21. 

What do these recommendations mean?

The consensus Wall Street analyst ratings are titled toward “holds” and “sells” for Joy Global. JOY’s exposure to oversupplied commodities markets and further capital expenditure cuts by mining customers have impacted JOY’s operational performances.

Joy Global has worked hard to cut expenses, however, by anticipating low future demand. Still, how long its cost-saving initiatives can help JOY post better-than-expected earnings—and whether the Komatsu integration effect can be a positive for JOY—remains to be seen.

Of course, the revival of the commodity cycle and prices are of the utmost importance for the company. Order book growth could be the key silver lining for the company in its latest quarterly results. But will investors want to make a long-term call to buy Joy Global in the hope that the commodity cycle can revive? And will the positive effects of the Komatsu acquisition begin any time soon? Keep checking in with Market Realist for these answers and more.

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