JLG Industries Gets a Healthy Lift
No doubt about it cyclical businesses can move quickly. When times are bad, they are really bad, and when business picks up, it can often do so in a flash. And now that commercial-construction activity is on the upswing, JLG is seeing a strong lift in its business.
Sales for the third quarter climbed 59% on U.S. sales growth of 54% and overseas growth of 75%. All of the company's margins were strong, and net income grew by more than 160% from the year-ago level. Growth in earnings per share didn't quite match up, thanks in large part to an equity offering that added to the share count, though it was still more than double the year-ago level and ahead of estimates.
JLG has made these strides despite high steel costs that it hasn't been able to recover entirely. Even though net unrecovered steel costs declined sequentially - from just under $27 million to just over $8 million -- that still constitutes a meaningful hit to earnings.
In my analysis, there's no doubt that JLG is benefiting from an upturn in the worldwide commercial-construction market. In particular, JLG continues to see strong rental-fleet refreshment as construction activity picks up.
Similar to what we've seen with heavy-machinery specialist Caterpillar, farm-machinery expert Deere, and mining-equipment leader Joy Global in their respective sectors, an awakening of the commercial-construction sector has given the renters the cash flow that allows them to replenish their fleets and update their product offerings.
Company executives, to their credit, are using this boom to clean up the balance sheet. Not only are receivables and inventory levels looking better, but the company also cut net debt by about $230 million and exited the quarter with a net debt-to-total capital ratio of 12% - the best ratio for the company in quite a while...
By Stephen D. Simpson, CFA
May 25, 2005
Sales for the third quarter climbed 59% on U.S. sales growth of 54% and overseas growth of 75%. All of the company's margins were strong, and net income grew by more than 160% from the year-ago level. Growth in earnings per share didn't quite match up, thanks in large part to an equity offering that added to the share count, though it was still more than double the year-ago level and ahead of estimates.
JLG has made these strides despite high steel costs that it hasn't been able to recover entirely. Even though net unrecovered steel costs declined sequentially - from just under $27 million to just over $8 million -- that still constitutes a meaningful hit to earnings.
In my analysis, there's no doubt that JLG is benefiting from an upturn in the worldwide commercial-construction market. In particular, JLG continues to see strong rental-fleet refreshment as construction activity picks up.
Similar to what we've seen with heavy-machinery specialist Caterpillar, farm-machinery expert Deere, and mining-equipment leader Joy Global in their respective sectors, an awakening of the commercial-construction sector has given the renters the cash flow that allows them to replenish their fleets and update their product offerings.
Company executives, to their credit, are using this boom to clean up the balance sheet. Not only are receivables and inventory levels looking better, but the company also cut net debt by about $230 million and exited the quarter with a net debt-to-total capital ratio of 12% - the best ratio for the company in quite a while...
By Stephen D. Simpson, CFA
May 25, 2005
posted by Steev @ 3:55 PM
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