Joy Global (NASDAQ:JOYG) Could Soar if Mining Capex Goes to Equipment

There is no doubt capex in the mining sector is going to go up significantly over the next year, for Joy Global (NASDAQ:JOYG), and other equipment makers, the question is how much will be allocated toward equipment, as a large portion is expected to be spend on infrastructure.

Barclays (NYSE:BCS) said, "We think the continued upward revisions in expected mining capex from major producers underscore our thesis of a long-duration mining up-cycle, which should benefit equipment makers such as JOYG. Vale recently almost doubled its 2011 capex to $24bn from $13bn, while Xstrata provided current visibility of - $23bn in spending out to 2016. Altogether, we are expecting almost a - 50% yoy growth in capex in 2011 (vs. 2010) from the major mining producers, compared to JOYG management's expectation of - 10%-15% for 2011 suggested early in 2010. While there could be a near-term lull in orders as producers initially focus their spending on infrastructure, we think the need for large mining equipment should eventually catch up to overall development and we could see acceleration in original equipment orders by mid-2011."

Barclays maintains an "Overweight" on Joy Global, which closed Friday at $79.08, up $0.72, or 0.92 percent. They have a price target on Joy Global of $82.