A Big Bundle Of Joy...Global

Joy Global (NASDAQ: JOYG) reported earnings this morning that were far higher than what Wall Street was expecting, and raised fiscal year guidance, as it expects the mining boom to continue.The Milwaukee-based company reported earnings of $1.62 per share on $1.14 billion in revenues. The report was mixed, as the $1.62 per share in earnings beat Wall Streets' estimates of $1.51 per share, but the company missed the Street's $1.15 billion revenue estimate. What is powering shares to the upside this afternoon is the company's guidance for the rest of the year, thanks in parts to its acquisition of LeTourneau. The company said that it expects to earn $5.70 to $6 per share this year, up from the $5.30 to $5.60 per share it saw previously. It also raised its revenue forecast, going from $4.1-$4.3 billion to $4.3-$4.5 billion. “This has been a particularly good quarter for us,” said Mike Sutherlin, President and Chief Executive Officer. “Our results continued the trend of strong operating performance, and we made two major strategic moves that will add long-term value. Very good operating leverage on strong sales growth enabled us to deliver another record for operating margin, before the impact of LeTourneau.“We closed on the LeTourneau acquisition in late June, and today announce the sale of the drilling products business to Cameron International. Cameron's leading presence in the oil and gas industry will allow Cameron to grow and develop LeTourneau's drilling applications with greater speed and efficiency. In a short time, I have gained a strong appreciation for the people that make up the LeTourneau drilling products business, and it is good to know that they will have a great home and a bright future at Cameron,” said Sutherlin.“For Joy Global, the divestiture enables us to focus on our core mission of mining equipment and the proceeds will expand our funding options to complete the acquisition of International Mining Machinery Holdings Ltd (“IMM”). We indicated that LeTourneau would be immediately accretive to earnings, and its mining results for a six-week period added $0.04 to our third quarter earnings per diluted share."With the company's announcement that it would be selling LeTourneau's drilling business to Cameron (NYSE: CAM) for $375 million in cash, Joy Global can continue to focus on what it does well: capitalizing on the mining and commodity boom. This has helped the company grow earnings 46% year-over-year, and revenues 34% year-over-year.The company was very positive on the industry fundamentals remaining intact. “Finally, our strong bookings this quarter indicate that the industry fundamentals remain intact. This is further supported by our growing list of qualified order prospects, as customers continue to move mine expansion projects forward and into the final stages for selection of mining equipment,” Sutherlin added. However, Joy Global did acknowledge that it does seem some slowing. The company expects lower growth prospects through next year, as CNBC's Herb Greenberg pointed out in a tweet. It expects that the U.S. and Europe may be "structurally lower for several years" in terms of growth. Despite this, it does think the global economy is stronger than it was during the financial crisis of 2008 into 2009.The company benefited from not only from strong sales, but also higher prices, some customer contract cancellation fees and less overhead from manufacturing.From a technical standpoint, Joy Global gapped up above its 200 day moving average ($84.95), but is now well below that, trading just under $84 as of the time of this writing. It moved past the 50 day moving average at $84.48. Both of these levels look to be resistance at this time. Despite rolling over today, Joy Global appears to be firing on all cylinders, and for shareholders, that is certainly a little (or perhaps big) bundle of joy.ACTION ITEMS:

Bullish:
Traders who believe that Joy Global will continue to report strong earnings might want to consider the following trades:

• At 11 times 2012 earnings, Joy Global is not expensive at all. Also consider other companies like Caterpillar (NYSE: CAT), Deere & Co. (NYSE: DE) and Cummins (NYSE: CMI).

Bearish:
Traders who believe that the economy is slowing faster than the companies expect may consider alternate positions:

• If growth out of China and other emerging markets are slowing faster than these companies are seeing right now, traders could short a basket of the names. If they are not comfortable shorting individual equities, consider shorting the Industrial SPDR ETF (NYSE: XLI).
  
  

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