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Jabil Circuit Authorizes New $100M Share Repurchase Program

Zacks Equity Research

Leading provider of electronic manufacturing services, Jabil Circuit Inc. (JBL) recently announced that its board of directors has authorized the repurchase of up to $100.0 million worth of the company’s common stock. This program will expire on Aug 31, 2015.

Jabil’s strong financial position and encouraging cash flow allows management to raise its shareholder wealth through a regular quarterly dividend of 8 cents per share and share repurchases.

In the third quarter of fiscal 2014, the company‘s cash and cash equivalents were up 95.6% sequentially to $1.32 billion. During the quarter, debt fell 20.9% on a quarter over quarter basis, thus improving the overall financial position.

In the third quarter, Jabil repurchased 3.6 million shares at a total cost of approximately $65.0 million. The company had $70.0 million remaining under the $200.0 million repurchase program, which was scheduled to expire on Aug 31, 2014.

During the quarter, Jabil completed the divestiture of its aftermarket services business in the quarter, which is expected to boost growthin the core operations over the long term. Jabil forecasts fiscal 2015 earnings to be in the range of $1.65 to $1.95 per share, driven by improving business trends and new bookings.

We believe that the new share repurchase program will improve the confidence of the shareholders post the disengagement from Blackberry (BBRY). It will also improve  bottom line  in 2014.

Although management’s 2015 guidance is encouraging, we believe that the disengagement from Blackberry will adversely affect top line and margins over the next couple of quarters.

Nevertheless, Jabil’s increasing association with Apple (AAPL) is expected to boost its growth prospects. Additionally, estimated strong growth from the Nypro acquisition, restructuring benefits and customer wins will help Jabil to compete with the likes of Flextronics (FLEX) in 2014 and 2015.

Currently, Jabil has a Zacks Rank #1 (Strong Buy).

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