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Will Top Line Contraction Hinder Jabil's (JBL) Q3 Earnings?

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Jabil Inc. (JBL - Free Report) is set to release third-quarter fiscal 2024 results on Jun 20, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 1.82%. It pulled off a trailing four-quarter earnings surprise of 4.02%, on average. The company’s top line is expected to be plagued by soft demand trends in multiple end markets. However, healthy traction in AI data center hardware, software-defined electric and hybrid vehicles, healthcare and packaging are tailwinds.

Factors at Play

During the quarter, Jabil introduced a series of cutting-edge advancements in its cloud server portfolio to cater to the evolving demand for the financial service industry. The company’s portfolio offerings optimized for financial service applications include several models such as J322-S, J312-S and J311-S.

The latest Smart Network Interface Cards and Precision Time Management features ensure the performance, reliability, and data integrity needed for the most demanding time-sensitive fintech applications. The strategic move will strengthen Jabil’s server portfolio and is expected to have improved commercial prospects in the digital finance market.

In the fiscal third quarter, Jabil collaborated with MaxLinear to release state-of-the-art 800G silicon photonics-based optical transceiver modules powered by Intel technologies. The modules, designed to fuel the AI/ML revolution, promise unparalleled high-speed connectivity and scalability. This is likely to have supported the net sales during the quarter.

However, uncertain market conditions in several end markets continue to be a headwind for the company in the near term. Weakness in Connected Devices, industrial & semi-cap, renewable energy and 5G markets is likely to have impeded net sales in the third quarter of fiscal 2024. Growing competition from both domestic and international electronic manufacturing services and design providers remains an overhang.

Zacks Consensus Estimate for the DMS vertical is pegged at $3.3 billion, indicating a decline from $4.34 billion reported in the year-ago quarter. Revenues from the EMS vertical are pegged at $3.2 billion, implying a downtrend from $4.13 billion in the year-ago quarter.

For the May quarter, the Zacks Consensus Estimate for revenues is pegged at $6.51 billion, which indicates a decline from the year-ago quarter’s tally of $8.48 billion. The consensus estimate for earnings is pegged at $1.85, suggesting a decrease from $1.99 reported in the prior-year quarter.

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Jabil this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at $1.85. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Jabil, Inc. Price and EPS Surprise

Jabil, Inc. Price and EPS Surprise

Jabil, Inc. price-eps-surprise | Jabil, Inc. Quote

Zacks Rank: Jabil currently has a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

General Mills (GIS - Free Report) is set to release its quarterly numbers on Jun 26. It has an Earnings ESP of +0.93% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Micron Technology (MU - Free Report) stands at +5.22%. The company carries a Zacks Rank of 2. It is scheduled to report quarterly numbers on Jun 26.

The Earnings ESP for NIKE (NKE - Free Report) stands at +1.30% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jun 27.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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