Diamonds and Dogs

3/5/15

Shareholders of Joy Global (JOY) aren't so joyful today with their stock down 5% to levels not seen since September of 2009. Joy Global reported disappointing earnings this morning missing earnings estimates by a wide margin as sales fell 16% year over year. Even worse the company lowered guidance due to weakening global demand for its mining equipment. The lower commodity prices have reduced cash flow with Joy Global's customers which in turn has caused capital expenditures reductions and delays for their equipment. Not good news for Joy Global or any company that relies on commodity prices for the business.

Pharmacyclics (PCYC) is the diamond of the day up 10% to $254 after agreeing to be bought out by AbbVie for $21 billion. AbbVie predicts that Pharmacyclics' Imbruvica drug, which is used to treat certain blood cancers, will achieve peak sales of $7billion, and will boost earnings by 60 cents a share by 2017.   A growing trend among the major pharmaceutical companies is to buy out other drug companies instead of building up your own drug pipelines. Almost $70billion of mergers and acquisitions have been announced in pharma and biotech so far this year, according to Thomson Reuters, more than double the level of activity seen by the same point in 2014 and the strongest start to a year in over a decade. It's a good time to be in biotech.