It has been about a month since the last earnings report for Jabil, Inc. (JBL - Free Report) . Shares have added about 2.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is JBL due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Jabil reported better-than-expected fiscal second-quarter 2018 results wherein both the top and the bottom line surpassed the Zacks Consensus Estimate and recorded year-over-year improvement.
The company reported earnings of 66 cents per share, which beat the Zacks Consensus Estimate by 4 cents and were much higher than the prior-year quarter’s figure of 49 cents. The figure was also better than the mid-point of the guided range of 50-74 cents per share due to a favorable tax rate.
Revenues increased 19.2% year over year to $5.301 billion and outpaced the Zacks Consensus Estimate of $4.911 billion as well. The figure surpassed the guided range of $4.75–$5.05 billion, driven by wins in EMS segment and better-than-expected results of the company’s Green Point business.
Electronics Manufacturing Services (EMS) revenues (representing 54% of revenues) were up 7% year over year to $2.9 billion backed by growing number of customers in capital equipment, industrial, energy and automotive sectors.
Diversified Manufacturing Services (DMS) revenues (46% of revenues) increased 38% year over year to approximately $2.4 billion, driven by strength in mobility, lifestyles and healthcare businesses.
Gross margin contracted nearly 70 basis points (bps) on a year-over-year basis to 7.5%.
The company’s core operating income increased 17.8% year over year to $178.6 million. However, core operating margin remained unchanged at 3.4%. Increase in investments in the EMS segment coupled with cost overshoot in the packaging business impacted margins.
Balance Sheet & Cash Flow
The company exited the quarter with cash and cash equivalents of $940.8 million compared with $746.3 million in the previous quarter.
In the quarter, cash flow from operations was $352 million. Cash flow from operations for the first six months of the year was $298.2 million compared with $346.2 million in the year-ago period.
Jabil repurchased $132 million worth of shares in the quarter. At the end of the quarter, the company had $225 million outstanding under the current stock repurchase authorization.
For the third quarter, Jabil expects total revenues to increase 9% (at mid-point) year over year in the range of $4.75–$5.05 billion. Core operating income is estimated in the range of $125–$165 million.
DMS revenues are forecast to grow 10% year over year to $1.85 billion.
EMS revenues are anticipated to increase 8% on a year-over-year basis to $3.05 billion.
The company is expected to post core earnings in the range of 35–55 cents per share on a non-GAAP basis.
For the second half of fiscal 2018, the company projects core EPS to grow in the range of 20-25%.
Jabil anticipates $30 million of restructuring expenses in the second half of fiscal 2018. It expects to achieve $20 million to $30 million in cost savings in fiscal 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted downward by 5.3% due to these changes.
Jabil, Inc. Price and Consensus
At this time, JBL has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. 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.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise JBL has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.