Merrill Lynch, a unit of Bank of America (NYSE: BAC), recently upgraded Joy Machinery (NYSE: JOY), which sent the stock price soaring. That is also bullish for Caterpillar (NYSE: CAT) and securities in the coal sector such as Market Vector Coal (NYSE: KOL), the exchange traded fund, and Peabody Energy (NYSE: BTU), as Joy Machinery makes a great deal of equipment for coal mining.
As a result of the upgrade, Joy Machinery is up more than 12 percent for the last week of market action.
Caterpillar, Peabody Energy, and Market Vectors Coal also rose on the Joy Machinery upgrade. Joy Machinery is now up for the last week, month, quarter, six months, and year of market action. For 2014, Joy Machinery has risen more than 10 percent (chart below). It has outperformed both the stock market overall and other stocks in its group.
Joy Machinery has an above average profit margin, which makes it appealing to investors.
Growth next year is projected to be very strong. It does not carry much debt. There is also a dividend to entice income investors. The payout ratio for the dividend is very low. That leaves plenty of cash to increase the dividend amount or initiate share buybacks to reward those owning the stock.
The macro trends are certainly bullish for Joy Machinery.
China and India, the two most populous countries in the world, are major coal users. Growth is returning to those nations after The Great Recession, which will increase the demand for coal. Alternative energy is not working out on a mass scale. Oil and natural gas are expensive and require pipeline networks. Coal, for many reasons, remains the fuel of choice for much of the world. That results in a bullish outlook for Joy Machinery, Caterpillar, and others that will benefit from greater consumption of coal.