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Joy Global Inc. (JOY), Caterpillar Inc. (CAT): Is This Mining Equipment Company a Good Buy Now?

For the full year 2013, the company has revised its sales outlook from $60 billion-$68 billion to $57 billion-$61 billion. The EPS outlook was also lowered to around $7 per share. Investors might be excited after Caterpillar Inc. (NYSE:CAT)’s announcement that it would make share repurchases of around $1 billion, starting in the second quarter. Caterpillar Inc. (NYSE:CAT) pays its shareholders a higher dividend than Joy Global, at 2.9%, with a conservative payout ratio of 27%.

Deere & Company (NYSE:DE) also has a much higher valuation than Joy Global, at 10 times its trailing EBITDA. Deere & Company (NYSE:DE) operates in three business segments: agriculture & turf, construction and forestry, and financial services. Most of its revenue, $27.1 billion, was from the agriculture & turf segment while the construction & forestry segment ranked second with $6.4 billion in 2012 sales.

In the period 2004-2013, the company has spent $9.5 billion in share repurchases. For the full year, the company expects to grow its equipment sales by 6%. Its net income is estimated to come in at $3.3 billion.

My Foolish take

Joy Global seems to be a good buy at its current price due to consistent cash flow generation, conservative balance sheet, and its low valuation. Moreover, it derived the majority of sales from maintenance & repair, which is recurring, providing stable cash flow. If Joy Global is valued at 8 times its trailing EBITDA, Joy Global would be worth more than $80 per share.


Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is This Mining Equipment Company a Good Buy Now? originally appeared on Fool.com is written by Anh HOANG.

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