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Analyst Blog

On Oct 5, 2013, Zacks Investment Research downgraded Jabil Circuit Inc (JBL - Analyst Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Although Jabil reported a better-than-expected fiscal fourth quarter of 2013, its weak first quarter and full year 2014 guidance were primarily responsible for the downgrade. We believe that a weak first quarter revenue guidance and lowered earnings outlook for the full year will remain an overhang on the stock over the next several quarters.

Jabil noted that a possible disengagement with BlackBerry will negatively impact fiscal 2014 earnings by 28 cents to 34 cents per share. Jabil expects net revenue to decrease approximately 3.0% from the year-ago quarter to the range of $4.35 billion to $4.65 billion for fiscal first quarter of 2014.

Jabil expects to earn $2.48 per share (down from the earlier projection of $2.77) in fiscal 2014, driven by strong growth from the Nypro acquisition (16 to 22 cents), restructuring benefits (11 to 15 cents) and organic growth (11 to 31 cents).

We believe that Jabil will continue to face macroeconomic headwinds in the near term. Moreover, the company continues to invest in the diversified manufacturing segment, which will increase its capital expenditure going forward.

The Zacks Consensus Estimate for Jabil’s first quarter of 2014 has declined 20.3% (12 cents) to 47 cents over the last 30 days.

The Zacks Consensus Estimate for 2014 decreased 19.7% (40 cents) to $2.43 per share over the last 30 days. The Zacks Consensus Estimate for 2014 dropped 9.4% (25 cents) to $2.42 per share over the same period.

Other Stocks to Consider

Not all stocks are performing as poorly as Jabil. One stock worth considering at the moment is Plexus Corp (PLXS - Analyst Report), with a Zacks Rank #1 (Strong Buy). Facebook (FB - Analyst Report) and Akamai (AKAM - Analyst Report), both Zacks Rank #2 (Buy) stocks, are also looking good at present.

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