This Mining Equipment Stock Is Set to Rally: Joy Global Inc. (JOY), Caterpillar Inc. (CAT), Terex Corporation (TEX)

Another player in the sector, Terex Corporation (NYSE:TEX) is looking for 2015 revenue of $10 billion — 37% higher than 2012’s result, and just above the company’s prior peak in 2008 (though that peak didn’t include Demag). That number is going to be a tough target to reach, and Wall Street isn’t buying it — the average estimate for 2015 right now is about $8.9 billion.

Joy Global Inc. (NYSE:JOY) said it was comfortable with “previous guidance of earnings per fully diluted share between $5.75 and $6.35 on revenues of $4.9 billion to $5.2 billion, including $25 million of planned restructuring charges in 2013 with resulting savings not realized until 2014.” However, Joy’s management didn’t speak about its longer-term revenue outlook.

Joy Undervalued Relative to Peers

Joy’s revenue per share is rising at a stunning 105% rate, while for Caterpillar, it’s rising by only 30%, and for Terex Corporation (NYSE:TEX), it’s negative.

Joy’s ROIC (return on invested capital) currently stands at 19.32%, compared to Caterpillar’s 13.45% and Terex Corporation (NYSE:TEX)’s 2.46%. Clearly, Joy is enjoying a significantly higher economic moat than peers, along with an impressive revenue growth.

When Terex Corporation (NYSE:TEX) announced earnings a few days ago, the company disappointed the Street. Although the outlook and long-range guidance were still pretty positive, the company missed from the revenue line on down through the income statement. Revenue fell 13% in the period. Construction equipment led the way with a 35% decline, while material handling/port solutions fell 15%, materials processing fell 11%, and cranes fell 9%. Aerial work platforms were the only exception, as this business grew by 5% this quarter.

Caterpillar Inc. (NYSE:CAT)’s results weren’t impressive either. The company reported its fourth-quarter profit fell 55%, mainly due to a $580 million write-down for an acquisition in China.

The Verdict

Joy Global Inc. (NYSE:JOY) has an average ROE of 41.7% over the past 5 years — a spectacular return to shareholders. On both earnings and enterprise bases, Joy’s stock is still significantly undervalued relative to peers. This company may have a rally in its future.

The article This Mining Equipment Stock Is Set to Rally originally appeared on Fool.com and is written by Anindya Batabyal.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.