However, the brokerage lifted the price target from $26 to $28. Baird pointed out that the latest quarterly results indicated depressed CAPEX among the global mining firms. The lead analyst pointed out that the management expects another 10 percent drop in CAPEX next year.
In a research note to clients, the brokerage said, "There have been no reports of competing offers in the subsequent six weeks and we believe Komatsu is a logical acquirer of Joy, particularly considering Komatsu's strong, credible financial position. Thus we are adjusting our rating to Neutral and price target to $28. - At ~1.5x FY16 EV/Sales, the offer is in line with JOY's long-term average valuation and in our view a good long term deal for Komatsu given both the value of JOY's assets, brand and global reach as well as position in the mining cycle."
The analysts welcomed the management's move to align with a bigger partner that has a solid financials and the valuation price is attractive for Komatsu.
The brokerage would have liked Joy Global to reiterate its earlier EPS outlook for the fiscal year 2016 rather than withdraw it. Similarly, it wished for a modest reduction in revenue guidance.
The stock traded flat at $27.25 on Friday.
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