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Jabil Circuit's Analyst Day Offers Encouragement, But Initiatives Will Take Time

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September 28, 2016 1:20 pm
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Goldman Sachs remains Neutral on Jabil Circuit, Inc. (NYSE: JBL) following its analyst day, saying though the event offered positive signals, the initiatives will take time to materialize.

"We are encouraged by the company's focus on the sustainability of FCF, and we believe efforts in areas like optical and software/services are positives. However, we believe these efforts will take time to materialize and exposure to Apple (24% of sales in FY16) could continue to contribute to high volatility in the near to intermediate term," analyst Mark Delaney wrote in a note.

At the event, Jabil provided a $3.00 core EPS target for FY19, while emphasizing sustainability of FCF. Jabil also reiterated plans for capex to be $500-$600 million in FY17 and FY18.

Further, the company cut its revenue growth target in DMS to above 5 percent from 8-12 percent.

"We believe Jabil's expectation is that it can meet key customer ramps in DMS (e.g. Apple) in the next 12-36 months, but if large new capex is needed then Jabil would be comfortable allowing its exposure to handsets to moderate," Delaney noted.

Delaney also raised his price target to $23 from $21, while the stock is currently up 0.41 percent to $22.01.

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