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A month has gone by since the last earnings report for Jabil (JBL). Shares have added about 5.9% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Jabil’s Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Jabil reported second-quarter fiscal 2021 earnings of $1.27 per share, which beat the Zacks Consensus Estimate by 33.6% and increased 154% year over year.
Revenues increased 11.5% year over year to $6.82 billion backed by contract wins in healthcare, automotive, mobility, connected devices, cloud and 5G. The figure beat the Zacks Consensus Estimate by 4.9%.
Electronics Manufacturing Services (EMS) revenues contributed 47% to total revenues and declined 1% year over year to $3.1 billion.
Diversified Manufacturing Services (DMS) revenues contributed 53% to total revenues and improved 26% year over year to $3.6 billion. The upside can be attributed to growth in several end-markets such as connected devices, healthcare, automotive and mobility.
On Feb 18, Jabil along with its subsidiary medical device company, NP Medical, announced that the company is ready to deliver personal protective equipment (PPE) orders of medical-quality, FDA-cleared face masks made in the United States, directly and reliably sourced through Jabil’s operations in Memphis, TN.
Gross margin, on a GAAP basis, expanded 130 basis points (bps) year over year to 8.3%.
Core EBITDA margin expanded 150 bps on a year-over-year basis to 7.1%.
Operating expenses, on a GAAP basis, contracted 70 bps on a year-over-year basis to 4.9%. As a percentage of revenues, while selling, general and administrative (SG&A) expenses contracted 20 bps year over year to 4.5%, research & development (R&D) expenses remained unchanged on a year-over-year basis.
Non-GAAP core operating margin expanded 160 bps on a year-over-year basis to 4.2%.
Balance Sheet & Cash Flow
As of Feb 28, 2021, cash and cash equivalents were $838 million compared with $1.1 billion as of Nov 30, 2020. The company ended second-quarter fiscal 2021 with committed capacity under the global credit facilities of $3.8 billion.
In second-quarter fiscal 2021, Jabil repurchased approximately 1.9 million shares for $82 million, bringing total outstanding to $254 million, as part of a two-year $600-million authorization announced in September 2019.
Key Q2 Developments
On Jan 14, Jabil announced the acquisition of Ecologic Brands, a California-based sustainable paper-based packaging solutions provider. Per the deal, Ecologic’s team and operations will be integrated with Jabil’s Packaging Solutions division.
For third-quarter fiscal 2021, Jabil expects total revenues between $6.6 billion and $7.2 billion, suggesting an increase of 9% on a year-over-year basis at the midpoint of the range.
DMS revenues are forecast at $3.5 billion, which suggests an increase of 19% year over year. EMS revenues are forecast at $3.4 billion, which indicates an increase of 1% year over year.
Core operating income is estimated at $220-$270 million. The company’s core earnings are expected between 90 cents and $1.10 per share on a non-GAAP basis.
The company raised its outlook for fiscal 2021. Revenues are expected to be around $28.5 billion, with expected core margin of 4.2%.
DMS segment revenues are expected to be $15.1 billion, with expected core margin of 4.6% for fiscal 2021.
Further, EMS segment revenues are expected to be $13.4 billion with core margin projected to be 3.6%.
The company’s core earnings are expected to be $5 per share on a non-GAAP basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.74% due to these changes.
Currently, Jabil has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 B. 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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