Jabil Circuit, Inc. (NYSE: JBL – $18.43), provider of electronic manufacturing services and assemblies, reported adjusted third quarter revenue of $4.3 billion and earnings per share of $0.17. This compares to prior year sales of $4.36 billion and per share earnings of $0.39. Wall Street had pegged JBL with revenue of $4.2 billion and earnings of $0.15. However, the company now sees fourth quarter revenue of between $4.15 billion and $4.35 billion, below consensus of $4.65 billion. Management also guided earnings per share of $0.15 and $0.35 per share, well below analysts’ views of $0.53. This guidance will lower the company’s full year results to about $1.79 per share, below previous estimates of $2.10. The Board also approved a $400 million share buyback program through August, 2017.
Key customers – Apple and AT&T – are causing havoc for Jabil over the near term. However, I like these shares as a long-term play, as valuations remain compelling despite the lower guidance. The growth story at JBL, while briefly pausing, still looks to have plenty of room to run. Moreover, temporary near-term challenges in the mobility market are countered by Jabil’s efforts to rapidly accelerate product development across its emerging markets. I believe favorable secular trends in demand for offerings with higher connectivity ought to pay off over the next 3 to 5 years and positions in a well-diversified aggressive account can be held for now.