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Jabil Beats on Sales and Earnings; Announces Buyback

St. Petersburg, Florida’s Jabil, Inc. (NYSE: JBL – $27.90) a supplier of turnkey manufacturing services for circuit board assemblies and systems, posted mostly positive fiscal third-quarter results. The company achieved revenues of $5.4 billion, far more than expectations of $4.9 billion and 21% higher than the previous-year figure. Adjusted earnings per share rose to $0.46 from $0.31, exceeding analysts’ estimates of $0.44.

       Jabil has been working hard to diversify its revenue sources, and the fruits of these efforts are showing up in the top-line. Although share net increased 48% year over year, the stock slipped in value after the report. Management elaborated on a couple of reasons why margins were constrained. First, the company is continuing to experience cost overruns in the packaging business. With strong organic growth in that end market, expenses have been running high to meet demand. Overhead should be under better control within the next quarter or so. Meanwhile, there are some challenges in the supply chain. Indeed, factory leverage has weakened, due to difficulty attaining sufficient levels of materials and electronic components. Management estimates that this problem will subside by mid-2019.

       Nevertheless, for fiscal 2018, management still envisions earnings to come in at around $2.60 per share and $3.00 in 2019. Jabil also announced that its Board of Directors has authorized an additional share repurchase program of up to $350 million in common stock. From an investment standpoint, these shares seem inexpensively valued, and today’s pullback presents an even better entry point for aggressive accounts.

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