CAT buys BUCY for $92

Today Caterpillar (CAT) bought Bucyrus (BUCY) for $92 a share. Bucyrus makes huge earth-moving equipment that is used to extract coal, copper, iron and other mining materials.

BUCY was a solid stock, as the ten-year chart (above) shows. Hammered in the 2008 stock market crash, the company was still able to post record profits in 2008 and 2009. Mining is BIG as international economies still crave minerals.

Excavating Leaders

Bucyrus’ main competitor is Joy Global (JOYG), which posted sales of $3.4 billion in the last four quarters. Bucyrus put out $3.1 billion during the same time.

JOYG has been trading on the NASDAQ since July 2001, and was formerly known as Harnischfeger Industries, which traces its roots back to the 1800s.

BUCY stock had only been public since July 2004. It opened at $8 and got taken out at $92 (not bad for a six and a half year wait). The company had gone back-and-forth between being public and private:

11/1927 – 02/1988 Public
02/1988 – 12/1994 Private
12/1994 – 09/1997 Public
09/1997 – 07/2004 Private
07/2004 – Current Public
Source: Bucyrus Website 

Prospects Look Bright

The one-year chart (above) shows profits are (were) expected to kick-back-up next quarter after three straight down quarters. Annual earnings were expected to drop a bit this year and then record profits were expected for 2011. I think Caterpillar bought BUCY at the right time as profit growth should turn up this quarter and then accelerate six months from now. 

Sharek’s Take

I’m not a big fan of CAT since the industry is so cyclical, but I love this purchase of  BUCY. Bucyrus is a solid company and now Caterpillar is going to be a monster in the field of mineral excavating. 

Disclosure: At the time of publication, David Sharek, his  family, nor clients of owned shares of BUCY or CAT.

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