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Stock Strategist

Joy Digs Moat With Aftermarket Business

A reset in the commodity market has pressured returns, but we think the firm's advantages are intact.

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 Joy Global (JOY) is one of the world's largest surface mining equipment manufacturers. The company has market share leadership positions in electric mining shovels and strong positions in blasthole drills, walking draglines, and wheel loaders. Its equipment is largely oriented toward coal mining, but it also has a strong position in copper mining. Underground mining equipment is marketed under the legacy Joy Mining Machinery brand, while surface mining equipment is sold under the P&H brand.

Over the near term, the company's new-equipment sales will be negatively affected by the construction slowdown in China and the related negative headwinds for its coal, copper, and iron ore customers. Additionally, its strong presence in U.S. Appalachian coal mining equipment has been adversely affected by that coal basin's declining cost competitiveness relative to unconventional natural gas. We think the company's aftermarket parts and service business has become extremely important relative to these near-term headwinds.

Kwame Webb does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.