The board of directors of Joy Global Inc. (NYSE:JOY), one of the leading providers of high-productivity mining equipment, approved the repurchase of its common stock worth $1 billion over the next 36 months, despite weak third quarter financial results.
Joy Global repurchase program
Joy Global Inc. (NYSE:JOY) said it has the ability to implement a huge shares repurchase program because its U.S. pension plans are almost fully funded. The company projected that it will be able to reduce its pension funding by $115 million next year.
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Mike Sutherlin, president and chief executive officer of Joy Global Inc. (NYSE:JOY) said, “This gives us a solid position from which to execute a share repurchase program, and I am pleased to announce that our Board of Directors has authorized us to repurchase up to $1 billion of our shares over the next three years.”
Sutherlin said the market has become more challenging and the company experienced order declines for original equipment and aftermarket equipment in the third quarter. He said, “The supply surplus that was centered in the U.S. coal market last year has migrated to the international markets, and they are now going through similar aftermarket corrections to that in the U.S. Based on the U.S. experience, we expect this to create headwinds for most of the next year.” He also noted an increased uncertainty on orders for original equipment.
Joy Global expects a decline in order rate from its previous outlook
Joy Global Inc. (NYSE:JOY) expects a decline in order rate from its previous outlook despite improvement in some of its select projects. Sutherlin said the company’s run rate is expected to be higher than the current quarter.
Joy Global Inc. (NYSE:JOY) reported $1.71 diluted earnings per share, lower than its $1.82 earnings per share in the same period a year earlier. The company generated $1.3 billion net sales, down from $1.4 billion last year.
The company’s bookings declined by 36% to $695 million. Joy Global Inc. (NYSE:JOY) suffered a 76% declines in orders for original equipment and 13% decline in aftermarket orders. The company explained that the decline was due to adjustment of beginning backlog for foreign currency exchange rate movements particularly the Australian currency during the quarter. Its backlog was $1.6 billion by the end of the third quarter.
Joy Global Inc. (NYSE:JOY) said its operating income was 20.8% of its sales and recorded $350 million cash generated from continuing operations, up from $157 million last year.
Sutherlin said, “I am very pleased with the bottom line focus and operational efficiencies that we are building into our business. These efficiencies are supporting operating margins that remain above 20 percent. Our commitment to balanced performance includes asset efficiency as well as profitability, and reductions in accounts receivable and inventory led to significant improvement in operating cash flow,” said Sutherlin.
Joy Global maintained its earnings guidance for the full year
According to Sutherlin, Joy Global Inc. (NYSE:JOY) is delivering savings ahead of schedule as the company continues to implement its cost reduction program to be able to deliver strong results amid challenging market conditions.
Joy Global Inc. (NYSE:JOY) maintained its earnings guidance for the full year 2013 in the range of $5.60 to $5.80 per share on revenues of around $4.9 billion to $5.0 billion.