Here's Why Jabil (JBL) Appears to be a Smart Investment Pick
Shares of Jabil Inc. JBL have risen 15.1% over the past year, driven by healthy revenues on the back of a flexible business model and a quick time-to-market schedule to meet clients’ evolving needs. Earnings estimates for the current fiscal have increased 35.3% over the past year, while that for the next fiscal rose 28.7%, implying solid inherent growth potential. With healthy fundamentals, this Zacks Rank #1 (Strong Buy) electronics solutions provider appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Growth Drivers
Headquartered in St. Petersburg, FL, Jabil is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.
Jabil’s focus on end-market and product diversification is a key catalyst. The company’s target that “no product or product family should be greater than 5% operating income or cash flows in any fiscal year” is commendable. This initiative should position the company well on the growth trajectory. The diversification will increase the reliability of the company’s earnings and revenues, thereby driving returns for investors in the long haul.
In addition, Jabil’s top-line growth is expected to benefit from strength in healthcare, cloud, retail and industrial. The company is expected to gain from the rapid adoption of 5G wireless and cloud computing in the long haul. The company is benefiting from solid demand in key end markets together with excellent operational execution and skillful management of supply chain dynamics.
With more than 260,000 employees across 100 locations in 30 countries, Jabil is likely to benefit from secular growth drivers with strong margin and cash flow dynamics. Moreover, its unmatched depth of end-market experience, technical and design capabilities, manufacturing know-how, supply chain insights and global product management expertise have put it in good stead. An extensive global footprint is further strengthened by a centralized procurement process, which coupled with a single Enterprise Resource Planning system, enables customers with end-to-end supply chain visibility.
The stock delivered an earnings surprise of 13.5%, on average, in the trailing four quarters and has a long-term earnings growth expectation of 12%.
Other Key Picks
Viavi Solutions Inc. VIAV, carrying a Zacks Rank #2 (Buy), is another solid pick for investors in the broader industry classification. It delivered a modest earnings surprise of 15.6%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 10.8% since April 2021, while that for the next year is up 9.2%.
Viavi boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. Its wireless and fiber test solutions are in the early stages of a multi-year investment cycle fueled by the transition of OEMs and service providers to superfast 5G networks. Viavi expects growth to be driven by the secular demand for 5G wireless, fiber and 3D sensing.
Knowles Corporation KN sports a Zacks Rank #1. It has a long-term earnings growth expectation of 10% and delivered a modest earnings surprise of 14.9%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 16.8% since April 2021.
The transformation from an acoustic component supplier to an audio solutions provider has enabled Knowles to migrate to higher-value solutions and increase content per device. This, in turn, has empowered the company to capitalize on the positive macro trends in audio and edge processing solutions.
KVH Industries, Inc. KVHI, a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.
Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet position and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be further room for cash flow expansion.
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