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Jabil (JBL) Q2 Earnings Top, Sales Up in Auto & Transportation
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Jabil Inc. (JBL - Free Report) , one of the largest global suppliers of electronic manufacturing services, reported second-quarter non-GAAP earnings per share of $1.68, surpassing the Zacks Consensus Estimate of $1.65. Cost optimization initiatives and healthy demand in the automotive & transportation end market primarily drove the outperformance. However, the bottom line declined from the year-ago quarter’s tally of $1.88 per share.
The company reported revenues of $6.76 billion. The top line fell short of the Zacks Consensus Estimate of $6.9 billion and came in 17% lower than second-quarter 2023 sales, primarily due to weakness in several end markets.
Fiscal 2024 is going to be a year of transition for Jabil as management is placing a strong emphasis on optimizing its footprint and cost structure. In the second quarter, the company completed divestiture of its Mobility business. The move highlight’s company’s strategic intent to invest more in core operations and reward shareholders with risk-adjusted returns in the form of incremental share repurchases.
Net sales from the Diversified Manufacturing Services (DMS) declined 16% year over year to $3.4 billion. The mobility divestiture and demand softness in connected devices impacted the top line from this vertical. However, 11% year-over-year growth in the automotive and transportation end market supported the top line. Healthy traction in healthcare is a tailwind. Non-GAAP operating margin was 5.6% up from 4.6% in the year ago quarter. Changes in the business mix in the DMS segment drove the uptick in profitability.
Electronics Manufacturing Services contributed $3.3 billion in revenues, down 18% year over year. The ongoing transition to a consignment model in cloud business combined with sluggish demand trends in 5G, renewable energy and digital print businesses impeded the top line. During the quarter, fast growing market such as India scaled back 5G infrastructure investments. The downtrend in infrastructure rollout was earlier than anticipated. Non-GAAP operating margin was 4.4% in the second quarter, down from 5.1% in the year-ago quarter.
Financial Position
In the February quarter, selling, general and administrative costs rose to $308 million from 285 million in the year-earlier quarter. Research and development costs increased to $10 million from $8 million in the year-ago quarter.
The company reported an operating cash flow of $218 million from operating activities compared to $414 million in the year-ago quarter. As of Feb 29, 2024, the company had $2.56 billion in cash and cash equivalents, with $2.87 billion of notes payable and long-term debt. Capital expenditure stands at $170 million with an adjusted free cash flow of $48 million.
In the second quarter, the Zacks Rank #3(Hold) company bought back 6.5 million shares worth $825 million from its total $2.5 billion repurchase authorization for fiscal 2024.
Management expects weakness in 5G and renewable energy end markets will likely continue in the second half of fiscal 2024. Demand trends in digital print, networking & storage and connected devices are also projected to remain weak for the remainder of the current fiscal. However, solid traction in health care, AI cloud data centers and the growing proliferation of EV and autonomous driving systems will likely support the top line.
For fiscal 2024, Jabil estimated net revenues to be $28.5 billion, down from the previous estimation of $31 billion. Core earnings per share is expected at $8.40, down from the prior expectation of around $9 per share. The core operating margin is expected at about 5.6%.
End market-wise, for fiscal 2024, net sales of 5G wireless & cloud are projected at $4.4 billion, suggesting a decline of 28% year over year. Net sales from connected devices are forecast at $3 billion, indicating a 25% year-over-year decline. Networking & storage is likely to witness a 16% revenue decline year over year to $2.6 billion. Revenues from industrial & semi-cap are estimated at $3.7 billion, suggesting a 16% year-over-year downturn. Jabil expects $5.7 billion in revenues from healthcare and packaging in 2024. Revenues from auto & transportation are estimated at $4.8 billion, indicating a rise of 9% year over year. Contribution from digital Print & retail and mobility is anticipated at $2.6 billion and $1.7 billion, respectively.
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Jabil (JBL) Q2 Earnings Top, Sales Up in Auto & Transportation
Jabil Inc. (JBL - Free Report) , one of the largest global suppliers of electronic manufacturing services, reported second-quarter non-GAAP earnings per share of $1.68, surpassing the Zacks Consensus Estimate of $1.65. Cost optimization initiatives and healthy demand in the automotive & transportation end market primarily drove the outperformance. However, the bottom line declined from the year-ago quarter’s tally of $1.88 per share.
The company reported revenues of $6.76 billion. The top line fell short of the Zacks Consensus Estimate of $6.9 billion and came in 17% lower than second-quarter 2023 sales, primarily due to weakness in several end markets.
Fiscal 2024 is going to be a year of transition for Jabil as management is placing a strong emphasis on optimizing its footprint and cost structure. In the second quarter, the company completed divestiture of its Mobility business. The move highlight’s company’s strategic intent to invest more in core operations and reward shareholders with risk-adjusted returns in the form of incremental share repurchases.
Jabil, Inc. Price, Consensus and EPS Surprise
Jabil, Inc. price-consensus-eps-surprise-chart | Jabil, Inc. Quote
Segment Performance
Net sales from the Diversified Manufacturing Services (DMS) declined 16% year over year to $3.4 billion. The mobility divestiture and demand softness in connected devices impacted the top line from this vertical. However, 11% year-over-year growth in the automotive and transportation end market supported the top line. Healthy traction in healthcare is a tailwind. Non-GAAP operating margin was 5.6% up from 4.6% in the year ago quarter. Changes in the business mix in the DMS segment drove the uptick in profitability.
Electronics Manufacturing Services contributed $3.3 billion in revenues, down 18% year over year. The ongoing transition to a consignment model in cloud business combined with sluggish demand trends in 5G, renewable energy and digital print businesses impeded the top line. During the quarter, fast growing market such as India scaled back 5G infrastructure investments. The downtrend in infrastructure rollout was earlier than anticipated. Non-GAAP operating margin was 4.4% in the second quarter, down from 5.1% in the year-ago quarter.
Financial Position
In the February quarter, selling, general and administrative costs rose to $308 million from 285 million in the year-earlier quarter. Research and development costs increased to $10 million from $8 million in the year-ago quarter.
The company reported an operating cash flow of $218 million from operating activities compared to $414 million in the year-ago quarter. As of Feb 29, 2024, the company had $2.56 billion in cash and cash equivalents, with $2.87 billion of notes payable and long-term debt. Capital expenditure stands at $170 million with an adjusted free cash flow of $48 million.
In the second quarter, the Zacks Rank #3(Hold) company bought back 6.5 million shares worth $825 million from its total $2.5 billion repurchase authorization for fiscal 2024.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Guidance
Management expects weakness in 5G and renewable energy end markets will likely continue in the second half of fiscal 2024. Demand trends in digital print, networking & storage and connected devices are also projected to remain weak for the remainder of the current fiscal. However, solid traction in health care, AI cloud data centers and the growing proliferation of EV and autonomous driving systems will likely support the top line.
For fiscal 2024, Jabil estimated net revenues to be $28.5 billion, down from the previous estimation of $31 billion. Core earnings per share is expected at $8.40, down from the prior expectation of around $9 per share. The core operating margin is expected at about 5.6%.
End market-wise, for fiscal 2024, net sales of 5G wireless & cloud are projected at $4.4 billion, suggesting a decline of 28% year over year. Net sales from connected devices are forecast at $3 billion, indicating a 25% year-over-year decline. Networking & storage is likely to witness a 16% revenue decline year over year to $2.6 billion. Revenues from industrial & semi-cap are estimated at $3.7 billion, suggesting a 16% year-over-year downturn. Jabil expects $5.7 billion in revenues from healthcare and packaging in 2024. Revenues from auto & transportation are estimated at $4.8 billion, indicating a rise of 9% year over year. Contribution from digital Print & retail and mobility is anticipated at $2.6 billion and $1.7 billion, respectively.
Other Stocks to Consider
InterDigital, Inc. (IDCC - Free Report) , carrying a Zacks Rank #2 (Buy) at present, delivered a trailing four-quarter average earnings surprise of 170.50%. In the last reported quarter, it delivered an earnings surprise of 16.53%.
IDCC is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.
Pinterest (PINS - Free Report) , carrying a Zacks Rank #2 at present, delivered a trailing four-quarter average earnings surprise of 37.42%. In the last reported quarter, it delivered an earnings surprise of 3.92%.
Pinterest is increasingly establishing a unique value proposition to advertisers that could provide a competitive advantage in the long haul. Through various innovations, it continues to dramatically improve the advertising platform, which appears to be one of the best ad platforms for consumer discretionary brands looking for ways to reach customers and stretch smaller ad budgets.
Workday Inc. (WDAY - Free Report) , carrying a Zacks Rank #2 at present, delivered an earnings surprise of 9.03% in the last reported quarter.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.