Jabil Circuit Misses Estimates; Cuts Outlook
Jabil Circuit, Inc. (NYSE: JBL – $19.59), which provides worldwide electronic manufacturing services and solutions, reported adjusted fiscal second-quarter earnings of $0.57 a share on revenue of $4.4 billion. Analysts had forecast earnings of $0.60 a share on revenue of $4.5 billion. Revenue in the electronics manufacturing services segment, which still accounts for more than half of its revenue and caters to clients in such areas as automotive and the so-called connected-home business, rose to $2.7 billion from $2.63 billion a year earlier. Previously, Jabil had forecast an increase of up to 5% for the current year. The diversified manufacturing services segment, which focuses on the defense and aerospace industry, health care and so-called wearable technology, was at $1.7 billion, compared with $1.68 billion a year earlier. Jabil had previously projected a roughly 14% increase to $1.9 billion for the quarter and had targeted an 8% to 12% segment revenue increase for the year. Following the results, the company cut its guidance for the remainder or 2016 and projected downbeat results for the current quarter, warning of weaker demand in its mobility segment. For the fiscal third quarter, Jabil forecast adjusted earnings of $0.12 to $0.18 a share on revenue of $4.1 billion to $4.3 billion, well below analysts’ estimates of $0.51 a share on revenue of $4.75 billion.
While these disappointments were not well received by The Street, I believe that over the period 3 to 5 years out, capital appreciation potential should remain above average. The shares can continue to be held in aggressive accounts, but investors will need to exercise patience.