This Time Tomorrow – $JOY Q2 Earnings

by Dan May 29, 2013 12:09 pm • Commentary

JOY, the manufacturer of underground mining equipment is bucking the broad market weakness today (up ~1.4%) in front of their fiscal Q2 earnings report tomorrow morning before the open.    The options market is implying about a 5% move one way or the other following the results, which is a tad higher than the 4 qtr avg of about 4.5%.

JOY is not a name that we talk about much, but the commentary and forward guidance from management could be instructive to bearish trades that Enis and I currently have on in CAT (here) and CMI (here).  JOY gets almost 50% of their sales from outside the U.S. so any color on emerging market demand & headwinds of strong U.S. dollar could set the stage for how investors think about U.S. multinational stocks in the back half of the year.

The technical setup shows a stock that has been a major laggard ever since commodities topped about 2 years ago:

3 year daily chart of JOY, Courtesy of Bloomberg
3 year daily chart of JOY, Courtesy of Bloomberg

The 200 day ma in black is around 59, which could act as resistance on the upside.  The key long-term support level is around the 49-50 area, where the stock bounced last summer.  It’s only a 8 P/E name, but it’s not projected to grow earnings until 2015.  If earnings stabilize, the stock’s cheap, but if they continue to contract, it’s a value trap.