Leave it to Joy Global CEO Michael Sutherlin to suck the joy out of a fabulous quarter. Despite beating the Street’s earnings estimates by 28 cents a share and revenue projections by a full $52 million, he still warned of backlog risk, commodities stockpiling by China and decreased US coal production. But hey, that’s just how he is, apparently.
“By nature I’m going to be a little bit conservative,” Sutherlin told Cramer on Thursday.
Don’t jump to conclusions, though. Sutherlin sees positive signs that his mining-equipment industry and the overall economy are improving. But those indicators are still “very, very early,” he said. Joy Global’s business backlog should carry the company for another year or more, but that will dwindle if the market doesn’t rebound.
“I’m just reluctant to go out on a line and say that the commodities markets are turning right now,” Sutherlin said. “So we continue to be cautious [and] manage our business for all possible outcomes.”
“I do believe the markets ahead will continue to be volatile,” the CEO said.
This will come as no surprise to regular Mad Money viewers, but Sutherlin said that China’s market is making a comeback and is importing “record levels” of commodities to meet the demand created by that country’s stimulus package. Contrast that with the US, which is still reducing its production levels to match the reduced demand for coal. The metals markets here also have come down “dramatically” because the mines contain older, higher-cost copper and iron ore. So the US is “still adjusting to the realities of a weaker market,” while the rest of the world approaches the upswing.
But Joy Global’s good fortunes aren’t all due to China’s resurgence. Industrial companies across the globe had reduced production levels “with a relentless effort” to get inventories down, Sutherlin said, so much so that demand has since outgrown supply. He expects these de-stocking efforts to end soon, and that will boost industrial production, “which will help commodities as well.”
Cramer ventured a hypothetical, asking Sutherlin whether his projections would be too low if the past month’s commodities rally was legit and continued.
“We hope that they’re too low,” the CEO replied. “That’s for sure.”
Cramer is bullish on Joy Global. The stock is off about 57% from its high, and he thinks there could be plenty of upside left.
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