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Jabil (JBL) Q1 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

Jabil, Inc. JBL reported first-quarter fiscal 2019 earnings of 90 cents per share, which beat the Zacks Consensus Estimate by a nickel and increased 12.5% year over year.

Revenues increased 16.5% year over year to $6.51 billion that outpaced the Zacks Consensus Estimate of $6.05 billion.

Quarter Details

Electronics Manufacturing Services (EMS) revenues (54% of total revenues) increased 22% year over year to $3.5 billion, driven by robust performance in print and retail, Industrial & Energy, 5G and cloud end-markets.

Diversified Manufacturing Services (DMS) revenues (46% of revenues) increased 10% year over year to $3 billion, driven by strength in healthcare, edge devices and accessories, and lifestyle end-markets.
 

Jabil, Inc. Price and Consensus

Jabil, Inc. Price and Consensus | Jabil, Inc. Quote

 

Gross margin on a GAAP basis contracted 40 basis points (bps) year over year to 8%.

Operating expenses on a GAAP basis declined 110 bps to 4.7%. Selling, general and administrative (SG&A) expenses as percentage of revenues decreased 100 bps to 4.3%. However, research & development (R&D) expenses remained unchanged at 0.2%.

Non-GAAP core operating margin contacted 20 bps to 3.9%.

EMS core margin declined 60 bps on a year-over-year basis, primarily due to softness in the capital equipment space and the costs associated with ramping of new business awards. However, DMS core margin improved 40 bps on a year-over-year basis.

Balance Sheet & Cash Flow

Jabil exited the quarter with cash and cash equivalents of $804.4 million compared with $1.26 billion in the previous quarter.

In the quarter, cash flow from operations was $5.2 million, while free cash outflow $216.1 million

Jabil bought shares worth more than $200 million in the quarter.

Guidance

For second-quarter fiscal 2019, Jabil expects total revenues between $5.8 billion and $6.4 billion. Revenues are expected to grow almost 15% year over year.

DMS revenues are forecast to be $2.85 billion, up roughly 6% year over year. EMS revenues are forecasted to be $3.25 billion, up nearly 23% year over year.

Core operating income is estimated to be $165-$205 million. The company’s core earnings are expected to be 51-71 cents per share on a non-GAAP basis.

Jabil is focusing on end-market diversification. Management expects growth to come from end-markets like healthcare and packaging, automotive, 5G wireless and cloud. New award wins for fiscal 2019 is roughly $2.15 billion, out of almost $1.06 billion related to the EMS segment.

For fiscal 2019, Jabil expects earnings of $3 per share on revenues of $25 billion. Adjusted free cash flow is expected around $350 million.

Zacks Rank & Stocks to Consider

Jabil currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include HubSpot HUBS, Monolithic Power Systems MPWR and Splunk SPLK. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for HubSpot, Monolithic Power and Splunk is projected to be 50%, 25% and 28.4%, respectively.

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