Joy Global Issues $500M Notes - Analyst Blog

Mining equipment manufacturer Joy Global Corporation (JOYG) issued $500 million unsecured notes yielding 5.125% interest per year and maturing on October 21, 2021. The notes were offered at $99.151 (per $100.00 principal). The new note offering secured a 'BBB' rating from Standard & Poor's Ratings Services.

Joy Global intends to utilize the proceeds of issue to fund in part the acquisition of 41.1% of the outstanding shares of Chinese coal mining equipment maker International Mining Machinery Holdings Ltd. (“IMM”) and, if the 41.1% acquisition is successful, a tender offer to acquire up to 100% of the remaining shares. The company intends to use any remaining balance of the proceeds for general corporate purposes.

Long-term debts of the company were $873.4 million as of July 29, 2011, up from $396.3 million as of October 29, 2010. The debt-to-capitalization ratio was 32.6%. The new issuance would further increase the debt-to-capitalization ratio to 42.8%.

Interest expenses of the company in the third quarter of fiscal 2011 rose by $2 million year over year mainly due to higher debt levels from the year-earlier quarter. With the issue of new debts, interest expenses will rise further in the coming quarters.

Joy Global reported adjusted earnings of $1.54 per share in the third quarter of 2011, which surpassed both the year-ago figure of $1.11 per share and our expectation of $1.50 per share.

During the earnings call the company raised its earnings per share guidance for 2011 to a range of $5.70 to $6.00 from $5.30 to $5.60. The guidance includes 10 cents accretion from LeTourneau's mining equipment business, net of 4 cents of inventory purchase accounting charges. It also takes into account 11 cents of discreet tax benefit realized and 12 cents of acquisition transaction costs incurred in the third quarter.

The Zacks Consensus Estimates for fourth quarter fiscal 2011, fiscal year 2011 and fiscal year 2012 are currently pegged at $1.85 per share, $5.87 per share and $7.20 per share, respectively.

Joy Global currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company competes with Caterpillar Inc. (CAT).

Mining equipment manufacturer and service provider Joy Global Inc. is based in Milwaukee, Wisconsin. The company caters to consumers all around the world and provides manufacturing, distributing and servicing equipment for surface mining, through its P&H Mining Equipment division, underground mining, through its Joy Mining Machinery division and bulk material conveyor systems, through its Continental Crushing & Conveying division.

CATERPILLAR INC (CAT): Free Stock Analysis Report

JOY GLOBAL INC (JOYG): Free Stock Analysis Report

Zacks Investment Research