Johnson expects the company to revise the midpoint of its 2016 guidance lower, which in turn would pressure the stock.
"Observing the last supply-driven commodity down cycle, we note that, peak-to-trough, aggregated global mining CAPEX (AGMC) fell 31.1 percent, while JOY's revenues moderated 61.1 percent over the same time-frame, or a 1.97-to-1.00 ratio," the analyst mentioned.
In addition, supporting this relationship is the fact that Joy Global's revenues during 1998-2015 displayed a 97.2 percent R² correlation to AGMC expenditures.
Given that both the company's revenues and the AGMC's most recent peak occurred in 2012 and assuming that the current down-cycle is only 40 percent that seen in 1996–1999, Johnson expects Joy Global's 2016 sales to come in at about $2.4 billion, as compared to the current guidance of $2.4–$2.6 billion.
"In fact, applying this same math to the actual decline in AGMC in '12–'15, one would have modeled JOY's '15 revenues at $3.1 billion vs. JOY's reported '15 consolidated sales of $3.2 billion (i.e., nearly spot on)," the Axiom report said.
Johnson also expects the company's OEM and After-Market margins to continue to be pressured in 2016.
The F1Q16 revenue and EPS estimates have been lowered. The FY16 revenue estimate has been lowered, while the EPS estimate has been raised.
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