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It has been about a month since the last earnings report for Jabil (JBL). Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jabil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Jabil Q1 Earnings Beat, Revenues Rise Y/Y
Jabil reported first-quarter fiscal 2021 earnings of $1.60 per share, which beat the Zacks Consensus Estimate by 53.8% and increased 52.4% year over year.
Revenues increased 4.4% year over year to $7.83 billion backed by contract wins in healthcare, automotive, cloud and 5G. The figure beat the Zacks Consensus Estimate by 11.9%.
Electronics Manufacturing Services (EMS) revenues contributed 46% to total revenues and declined 4% year over year to $3.6 billion.
Diversified Manufacturing Services (DMS) revenues contributed 54% to total revenues and improved 13% year over year to $4.23 billion. The upside can be attributed to growth in its $5-billion healthcare and packaging business, which serves many of the most critical healthcare, medical device and consumer packaged goods companies in the world.
Gross margin, on a GAAP basis, expanded 70 basis points (bps) year over year to 8.1%.
Core EBITDA margin expanded 100 bps on a year-over-year basis to 7.1%.
Operating expenses, on a GAAP basis, contracted 130 bps on a year-over-year basis to 4.1%. As a percentage of revenues, while selling, general and administrative (SG&A) expenses contracted 50 bps year over year to 3.9%, research & development (R&D) expenses remained unchanged on a year-over-year basis.
Non-GAAP core operating margin expanded 100 bps on a year-over-year basis to 4.7%.
Balance Sheet & Cash Flow
As of Nov 30, 2020, cash and cash equivalents were $1.1 billion compared with $1.39 billion as of Aug 31, 2020. The company ended first-quarter fiscal 2021 with committed capacity under the global credit facilities of $3.8 billion.
In first-quarter fiscal 2021, Jabil repurchased approximately 1.5 million shares for $50 million, bringing total year-to-date repurchases to $216.5 million, as part of a two-year $600-million authorization announced in September 2019.
For second-quarter fiscal 2021, Jabil expects total revenues between $6.2 billion and $6.8 billion.
DMS revenues are forecast to be $3.5 billion, which suggests an increase of 22% year over year. EMS revenues are forecast to be $3 billion, which indicates a decline of nearly 8% year over year.
Core non-GAAP operating income is estimated to be $210-$260 million. The company’s core earnings are expected between 83 cents and $1.03 per share on a non-GAAP basis.
For fiscal 2021, revenues are expected to be around $27.5 billion with expected core margin of 4.1%.
DMS segment revenues are expected to be $15 billion with expected core margin of 4.5% for fiscal 2021.
Further, EMS segment revenues are expected to be $12.5 billion with core margin projected to be 3.6%.
The company’s core earnings are expected to be $4.6 per share on a non-GAAP basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 17.16% due to these changes.
Currently, Jabil has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Jabil has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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