Update Joy Global (JOYG)

Another great quarter from mining equipment maker Joy Global (JOYG): earnings per share for the second quarter of the company’s fiscal 2011 year came in a $1.52, 17 cents a share above Wall Street estimates. Revenue climbed 19% from the second quarter of fiscal 2010 to $1.06 billion. That was slightly above the consensus forecast of $1.03 billion.

Another increase in guidance for the full 2011 fiscal year: For fiscal 2011 the company now sees earnings of $5.30 to $5.60 a share (former guidance was $5.10 to $5.40.) Wall Street analysts had been projecting earnings per share of $5.41. Revenue, the company now projects, will total $4.1 billion to $4.3 billion. That’s above former guidance of $4 billion to $4.2 billion. (The Wall Street consensus was $4.17 billion.)

And solid trends beyond the current year: Bookings are still climbing with an increase of $297 million from the first quarter of fiscal 2011. Backlog increased by $462 million to $2.6 billion. Key commodity markets—copper, for example—remain in a supply/demand deficit that still has a while to run. In the case of copper, for example, until 2013 or later, Joy Global said. In its conference call the company noted that it continues to see new projects—and therefore new potential customers—at a rate that matches current bookings.

The one thing that I was worried about—declining margins—wasn’t a factor in the quarter. Read more

Peabody’s the name if Asian coal is the game

(I am on vacation until August 24. During that time Jubak Picks will operate on a reduced schedule of one or two posts a day.)

If China is the story in coal—and I think it is since China is now the No. 1 energy consumer and uses about three times as much coal as the United States—then Peabody Energy (BTU) is the story among coal companies.

In reporting its second quarter earnings the company said that it expects global net coal imports to grow by 30% in 2010.

China is the driver of demand.

But the country isn’t alone. India’s coal imports are up 22% in 2010 and Peabody estimates that imports will finish the year up 20% from the total for 2009.

In January Peabody forecast that it would sell 240 million to 260 million tons of coal in 2010, compared to 244 million tons in 2009, because of increased demand in Asia.

Peabody, the largest U.S. coal producer, has been gradually adding assets in Australia in an effort to move closer to the fastest growing end markets. Peabody projects that it will sell 27 million to 29 million tons of Australian coal in 2010. That’s up from an earlier forecast of 26 million to 28 million tons.

Someday coal may hit the wall because the world’s countries have decided to implement an enforceable global climate change program to reduce carbon emissions, but Peabody hasn’t seen any effects from the half-hearted (or less) efforts so far. Coal is actually gaining market share at utilities and consumption in power generation is up 6% through the first half of 2010 from the same period of 2009. Thanks to the increased demand stock piles look like they’ll be down to normal levels by the end of 2010. That should help prices that Peabody already calls good.

In its July 20 second quarter earnings report the company beat Wall Street earnings estimates by 6 cents a share, reporting 69 cents for the quarter, and missed on revenues by $20 million, reporting $1.66 billion. Peabody confirmed earnings guidance for all of 2010 of $2.60 to $3.15 a share.

Full disclosure: I don’t own shares of any company mentioned in this post in my personal portfolio.

Update Thompson Creek Metals (TC)

Thompson Creek Metals (TC), a Canadian molybdenum producer, has been saying it would do an acquisition if it found a deal the company liked. Well, I guess Thompson Creek found that deal. On July 15 the company announced that it will acquire Terrane Metals (TRX.V in Canada and TRXOF.PK on the U.S. OTC market) for $624 million in cash and stock.

I think this is a good deal for Thompson’s shareholders. Terrane is a copper and gold miner that owns the Mt. Milligan project in British Columbia. Mt. Milligan, a relatively low-grade ore body, is forecast to produce 90 million pounds of copper and 260,000 ounces of gold annually beginning in 2013. The cost of getting Mt. Milligan to production is projected at $850 million. Thompson Creek has reduced its own need for capital to fund the project by selling 25% of the gold stream to Royal Gold (RGLD) for $311 million.

The economics work out—using $2.25 a pound and $1,100 an ounce as the long-term price of copper and gold, respectively—to add to shareholder value even after counting the shares that Thompson Creek will issue in the deal. The acquisition, calculates Paradigm Capital, will add about 2% to Thompson Creek’s net asset value.

Doesn’t seem like much, does it? 2% isn’t much of reason to do a deal.

And it wouldn’t be enough if that were all that Thompson Creek and its shareholders got out of the deal. Read more

For commodites stocks, it’s wait until next year

No secret that commodity prices have plunged on fears that global economic growth is fading. Or in the case of China slowing from near 12% annually to something like 8% or 9%.

And no secret that the prices of commodity stocks have plunged as well. Shares of copper, gold, and molybdenum producer Freeport McMoRan Copper & Gold (FCX) are down almost $30 from their April 5, 2010 high as of the close on July 6. That’s a drop of 33% in three months.

 But commodity producers, especially copper producers, are starting to talk about actual commodity shortages in 2011 because commodity producers are responding to current low prices by slowing expansion plans or putting off opening new production completely.

Commodities ride a wild boom and bust cycle—especially in a world where demand and supply are so closely balanced. Yes, it now looks like 2010 will be a commodity bust year. But that could put commodities and commodity stocks in position for a boom year in 2011.

 For investors, the commodities story may be Wait ‘til next year. Read more

Sell Impala Platinum (IMPUY.PK)

I’m going to use the current bounce, World-Cup-rally, summer rally, whatever to sell my position in Impala Platinum (IMPUY.PK). The South African stock looks like it’s in a steady downtrend despite its 13.8% gain off the June 4 low.

Platinum was bid up heavily by traders who bought it as a speculative precious metals play on market volatility, but the problem with platinum, unlike, say, gold, is that it’s both a precious metal and an industrial metal. With the European economy slumping and the U.S. economy showing signs of slower growth, the industrial demand for platinum hasn’t lived up to hopes and traders have been unwinding positions since April. (The company paid a half-yearly dividend on March 15.) Read more