Raymond James: Jabil Faces A Tough Environment, But Is Focusing On The Right Metrics

Jabil Inc JBL reported disappointing revenue in its fiscal second-quarter earnings release.

The company’s guidance implies an improvement in capital equipment, which has already played out, and this could result in full-year 2019 estimates being modestly reduced.

The Analyst

Raymond James’ Adam Tindle maintains a Market Perform rating on Jabil.

The Thesis

For the Diversified Manufacturing Services (DMS) segment, Jabil reported an 8 percent year-on-year decline in its quarterly revenue to $2.3 billion, missing the estimate by around $345 million, Tindle said.

Despite weaker revenue, the company delivered a higher-than-expected operating profit of $102 million. “This can be considered impressive evidence the diversification strategy is resulting in more stable earnings,” Tindle wrote in a note.

He added that this performance could continue into the back half of 2019 as profit is expected to grow 6-7 percent year-on-year on largely flat revenue.

Revenue for full-year 2019 is now expected to be $10 billion, a $300-million decrease from prior guidance.

The EMS segment delivered a revenue beat at $3.8 billion, although operating margins declined and missed expectations.

While the company is facing a tough mobility cycle, Tindle said the focus is on the right forward metrics, which would improve its business profile.

Share Action

Jabil fell 1.3 percent to $27.06 per share.

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Earnings Scheduled For March 14, 2019