Jabil Inc. (JBL Quick QuoteJBL - Free Report) recently completed the divestiture of its Mobility business to China-based BYD Electronic (International) Company Limited for $2.2 billion cash. The transaction was earlier expected to close on Jan 31, 2024. The preponement of the deal closure forced Jabil to revise its guidance for the second quarter of fiscal 2024.

For second-quarter fiscal 2024, revenues are currently expected to be in the range of $6.6-$7.2 billion, down from $7.0-$7.6 billion estimated earlier owing to lower revenue recognition from the divested business. Non-GAAP operating income is projected within $291-$351 million compared with the previous range of $339-$399 million. Management estimates non-GAAP earnings within the band of $1.43-$1.83 per share, down from $1.73-$2.13.

For fiscal 2024, Jabil expects net revenues to be in the vicinity of $30.6 billion with more than $9.00 in core earnings per share. The core operating margin is expected to be in the range of 5.3-5.5%.

The divestment is likely to enhance Jabil’s financial flexibility to help reward its shareholders with risk-adjusted returns in the form of incremental share repurchases. In addition, it is expected to facilitate the company to invest more in electric vehicles (EVs), renewable energy, healthcare, AI cloud data centers and other end markets to strengthen its position as one of the largest global suppliers of electronic manufacturing services.

Jabil is witnessing solid momentum in industrial business driven by growth in clean and smart energy infrastructure adoption. Strength in solar inverters, smart meters, energy storage & power and building management solutions is boosting the top line. The company has an established global presence and a worldwide connected factory network, which enables it to scale up production per the evolving market dynamics.

Management’s focus on improving working capital management and integrating sophisticated AI and ML capabilities to enhance the efficiency of its internal process acts as major tailwinds. The company is witnessing a resilient demand trend and anticipates substantial secular growth in EVs, healthcare, renewable energy infrastructure, 5G and cloud. Its automotive industry is poised to benefit as the transformation to EV accelerates.

Jabil is likely to benefit from secular growth drivers with strong margin and cash flow dynamics. Moreover, solid end-market experience, proven technical and design capabilities, manufacturing know-how, supply chain insights and global product management expertise have put it in good stead. An extensive global footprint is further strengthened by a centralized procurement process, which, coupled with a single Enterprise Resource Planning system, aids customers with end-to-end supply chain visibility.

The stock has gained 86.8% in the past year compared with the industry’s growth of 55.3%.

Image Source: Zacks Investment Research

Jabil presently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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