Jabil (JBL) Surges 87.7% YTD: Will This Uptrend Continue?
Shares of Jabil Inc. JBL have climbed 87.7% year to date, driven by healthy demand trends in various end markets, a flexible business model and solid cash flow. Earnings estimates for the current and next fiscal years have increased 7.7% and 13.8%, respectively, since December 2022. The projections imply robust growth potential. Backed by strong fundamentals, this Zacks Rank #3 (Hold) stock appears primed for further appreciation.
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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 in various industries, including aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications. A large-scale portfolio of business sectors offers Jabil a high degree of resiliency during times of macroeconomic and geopolitical disruption.
The company has an established global presence and a worldwide connected factory network, which enables it to scale up production according to the evolving market dynamics. Excellent operational execution and skillful management of supply chain dynamics are positive factors. Management’s focus on improving working capital management and integration of sophisticated AI and ML capabilities to enhance the efficiency of its internal process are major tailwinds.
The company is witnessing a resilient demand trend and anticipates substantial secular growth in electric vehicles, healthcare and renewable energy infrastructure. Specifically, strength in solar inverters, smart meters, energy storage & power and building management solutions are driving the top line. The company's automotive portfolio is poised to benefit as the transformation to EV accelerates. Moreover, JBL will likely gain from the rapid adoption of 5G wireless and cloud computing in the long haul.
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 it well on the growth trajectory. The company’s free cash flow was $1026 million in fiscal 2023 and it remains committed to generating more than $1,000 million free cash flow in fiscal 2024. A higher free cash flow indicates efficient financial management practices, optimum utilization of assets and improved operational efficiency.
During September 2023, the company inked a definitive agreement with BYD Electronic (International) Company Limited to offload its Mobility business at about $2.2 billion. The cash infusion through the divestiture will likely boost its financial flexibility. It will empower Jabil to drive resources into its core and as well as emerging verticals.
It has a long-term earnings growth expectation of 12% and delivered an earnings surprise of 4.11%, on average, in the trailing four quarters. JBL has an average brokerage recommendation (ABR) of 1.286 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.
Key Picks
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy) at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build cloud architecture and enhance their cloud experience. Arista delivered a trailing four-quarter average earnings surprise of 12%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ANET holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is gaining market traction in 200- and 400-gigabit high-performance switching products and is well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
NVIDIA Corporation NVDA, currently carrying a Zacks Rank #2, delivered a trailing four-quarter average earnings surprise of 18.99%. In the last reported quarter, it delivered an earnings surprise of 19.64%.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.
United States Cellular Corporation USM, sporting a Zacks Rank #1 at present, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services and a high-quality network to increase the competitiveness of local businesses and improve the efficiency of government operations.
U.S. Cellular has undertaken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.
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