The farm and construction equipment industry had a strong October, with both
Caterpillar (NYSE: CAT ) and Joy Global (NASDAQ: JOYG ) achieving gains in
October that were higher than the S&P 500, which was up 10.9%. Caterpillar was
up 24.7% and Joy Global 39.8%. Year-to-date, however, theyre both in negative
territory, about equal with the index. Still, both are heating up so which one
should investors flock toward? Analyst Consensus First, lets take a look at
Caterpillar. Its third-quarter report was exceptional, delivering record profits
and revenues. Earnings per share beat the consensus estimate by 21%. According
to Caterpillar, its backlog in the quarter was higher than its ever been, and
this prompted analysts to up their guidance for 2011 and 2012. Analysts are
calling for 2012 EPS of $9.04 per share. If CAT hits its 2011 estimate of $6.85,
that will mean earnings growth of 32% next year. Its hard to bet against that.
As for Joy Global, it expects revenues and earnings per-share for fiscal 2011 of
at least $4.3 billion and $5.70 per share. Its backlog as of the end of the
third quarter was $3.2 billion substantially higher than the $1.82 billion in
fiscal 2010. The primary reason for this growth continues to be the success of
the mining business in general. Joy Globals year-end is Oct. 31, whereas
Caterpillars ends on Dec. 31, so annual estimates dont compare perfectly but
nonetheless are helpful to look at. Joy Globals fiscal 2012 earnings estimate is
$7.20 per share. The 2011 estimate is $5.93, which is the high end of the
companys guidance as of the end of the third quarter. Joy Global has delivered
positive earnings surprises in three of the past four quarters. Assuming JOYG
earnings hit $5.93 per share, next years earnings growth will be approximately
21% year-over-year. Not quite as high as Caterpillar, but very reasonable.
Direct Competition Caterpillar and Joy Global became much closer competitors in
July when Caterpillar completed its $8.8 billion purchase of Bucyrus
International, a manufacturer of high-productivity mining equipment for the
surface and underground mining industries. Thats Joy Globals bread and butter.
At the end of 2010, Caterpillars mining revenues were 11% of overall revenue
compared to 100% for Joy Global.
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