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Why Is Jabil Circuit (JBL) Down 2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Jabil Circuit, Inc. (JBL - Free Report) . Shares have lost about 2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Jabil Circuit Q3 Earnings Miss Estimates, Revenues Beat

Jabil Circuit reported mixed third-quarter fiscal 2017 results wherein the bottom line missed the Zacks Consensus Estimate by a penny while the top line surpassed the same. Adjusted earnings (excluding all other one-time items but including stock-based compensation) of $0.21 per share lagged the Zacks Consensus Estimate of $0.22. However, on a year-on-year basis earnings jumped over two-folds.

However, revenues of $4.49 billion outpaced the Zacks Consensus Estimate of $4.41 billion and were higher than the prior-year quarter’s figure of $4.31 billion.

The company delivered approximately $114 million in core operating income resulting in core earnings per share of $0.31. Core operating margin was 2.5%, representing a 50 basis points (bps) improvement year over year.

Electronics manufacturing services revenues (representing 63% of revenues) came in at about $2.82 billion, down 1% year over year. Diversified Manufacturing Services revenues (37% of revenues) increased 14% year over year to $1.67 billion.

Operating Details

Gross margin contracted nearly 10 bps on a year-over-year basis to 7.3%.

The company’s operating income decreased 27.2% year on year to $43.4 million.

Balance Sheet & Cash Flow

The company exited the quarter with cash and cash equivalents of $743.9 million, compared with $912.1 million as of Aug 31, 2016.

Cash flow from operations for the first nine months of the year was $533 million compared with $488.2 million in the year-ago period.

Restructuring Program

The company continued with its plans to realign its global capacity and administrative support infrastructure so as to optimize organizational effectiveness amid a sluggish macroeconomic scenario. The company is progressing with efforts to improve organizational efficiency and effectiveness as planned. The company incurred approximately $31 million of restructuring charges in the third quarter with approximately $110 million in charges year to date.

Guidance

The company provided guidance for fourth-quarter fiscal 2017.

For the fourth quarter, Jabil expects total company revenue to increase 11% (at mid point) year on year and in the range of $4.7–$5.1 billion. Core operating income is estimated in the range of $165–$215 million.

Diversified Manufacturing Services revenues are forecasted to grow 26% year over year.

Electronics Manufacturing Services revenues are anticipated to improve moderately at 2% on a year-on-year basis.

On a GAAP basis, the company expects to report diluted earnings in a range of $0.13–$0.48 per share. Meanwhile, the company is expected to post earnings in the range of $0.50–$0.74 per share on a non-GAAP basis.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. In the past month, the consensus estimate has shifted by 5.9% due to these changes.

Jabil Circuit, Inc. Price and Consensus

 

Jabil Circuit, Inc. Price and Consensus | Jabil Circuit, Inc. Quote

VGM Scores

At this time, Jabil Circuit's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising.  It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.




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