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Global Stimulus Boosts Mining Equipment

Turner Emerging Growth manager Frank Sustersic says the next 12 months look fantastic for top-five holding Bucyrus.

Mike Breen: Maybe you can talk a little bit about Bucyrus. You were talking about the stimulus effect on that, and it was actually stimulus from India and China in some places in addition to the U.S. that were helping them out.

Frank Sustersic: Right. Bucyrus International makes a lot of dragline equipment used by miners, be it coal miners or copper or gold. We've seen a tremendous amount of resurgence in economic activity.

You already mentioned China's stimulus package was on a massive scale as a percentage of their GDP, and so their industrial activity has really skyrocketed this year. That has led towards the commodities pricing, be it copper, coal or gold, all having huge gains this year.

Bucyrus as a stock was really hurt a lot last year because everyone anticipated all of their customers, be it the miners, would cancel all of the equipment orders. The reality of it is that with the resumption of the commodities strength that those cancellations never really materialized.

Now we're seeing a turnaround this past quarter. The book-to-bill as far as new OEM equipment orders is one to one, over one now, and they've always had a fantastic service component of their revenue stream.

So you always had a company that always had a good stable base of revenues and earnings, but now that OEM business is returning at very nice rates, what we're going to see is that '09 was more of a slight hiccup and '10 and '11 should return to more robust growth rates.

Breen: So not just the one-time rebound from a low, actually. It has quite a bit of runway ahead of it.

Sustersic: Yes, exactly. The next 12 months look fantastic.

Breen: Great.