Thursday, March 25, 2010

Joy Global Move to Equal-weight from Not-Rated; Prefer BUCY $JOYG [MORGAN STANLEY]

We are bullish on mining equipment but we favor shares of Bucyrus over Joy Global. We have moved to an
Equal-weight rating on JOYG shares, from Not-Rated. We are bullish on mining equipment and see some cyclical upside to
JOYG shares; however, we see a more interesting investment opportunity in the relative spread between JOYG shares and
Bucyrus. Where we differ from consensus is that we think many investors overestimate the opportunity from a recovery in
US thermal coal, both in terms of timing — our channel contacts tell us that US coal investment is very weak, and will
remain so for the rest of the year — and magnitude. We also see the revenue outlook as more firm for Bucyrus. We think
JOY Global can make or exceed the top end of its revenue guidance range (i.e., $3 billion), with room for upside especially
if aftermarket orders start to come in. here


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