Jabil's Guidance Shows The Company Doesn't Believe Its Fate Is Tied To Apple

Jabil Inc JBL surprised UBS’ Steven Milunovich with by raising EPS guidance for fiscal 2018 to $2.60, compared to a $2.52 consensus.

The analyst reiterated a Buy rating and raised the company’s price target from $30 to $35. The increase reflects a shift from calendar 2017 to fiscal 2018 non-GAAP EPS of $2.65, despite leaving estimates “largely unchanged.”

The company’s fiscal third-quarter beat consensus with revenue at $4.5 billion compared to $4.4 billion and non-GAAP EPS of $0.31 over $0.29.

While Q4 guidance was as expected, management’s bullish tone in announcing fiscal 2018 has Milunovich suspecting opportunities for Jabil beyond Apple Inc. AAPL, which accounts for 24 percent of Jabil’s revenue.

Jabil Beyond Apple

The guidance suggests that Jabil is confident Apple’s iPhone 8 will be a success, and may also gain from participating in other products such as the new HomePod.

That said, fiscal 2018 non-GAAP EPS and Q4 guidance for the company’s diversified manufacturing services, which rose about $100 million for 26-percent growth year-over-year “wouldn’t occur with a rebound in Apple business,” according to Milunovich.

Milunovich believes the company may seek opportunities in apparel, noting that it is likely in discussion with non-Nike Inc NKE shoes companies.

Furthermore, “previously lowly contract manufacturers are benefitting” from greater roles in the good they produce and a shift towards more profitable industrial, healthcare, and packaging clients.

At time of publication, shares of Jabil were down 3.23 percent at $29.64.

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