A month has gone by since the last earnings report for Jabil (JBL). Shares have added about 3.4% 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 Q2 Earnings Miss, Coronavirus Dents Y/Y Growth
Jabil reported second-quarter fiscal 2020 earnings of 50 cents per share, which lagged the Zacks Consensus Estimate by 16.7% and decreased 21.9% year over year.
The earnings figure also lagged management’s guided range of 62-82 cents per share on a non-GAAP basis.
Notably, Jabil spent nearly $53 million related to business interruptions caused by COVID-19 (coronavirus) outbreak.
Revenues increased 1% year over year to $6.13 billion that beat the Zacks Consensus Estimate by 0.02%. The figure also surpassed the guided range of $6-$6.7 billion.
Electronics Manufacturing Services (EMS) revenues accounted for 63% of total revenues and increased 1% year over year to $3.8 billion. Diversified Manufacturing Services (DMS) revenues accounted for 37% of total revenues and improved 1% year over year to $2.3 billion.
Gross margin, on a GAAP basis, contracted 50 basis points (bps) year over year to 7%.
Core EBITDA margin contracted 60 bps on a year-over-year basis to 5.6%.
Operating expenses on a GAAP basis expanded 60 bps on a year-over-year basis to 5.5%. Both selling, general and administrative (SG&A) expenses and research & development (R&D) expenses as a percentage of revenues were unchanged on a year-over-year basis.
Jabil incurred $30 million in restructuring and severance-related charges in the second-quarter, primarily related to the 2020 restructuring plan announced in September 2019.
Non-GAAP core operating margin contracted 50 bps on a year-over-year basis to 2.6%.
Balance Sheet & Cash Flow
As of Feb 29, 2020, cash and cash equivalents were $696.7 million compared with $719.8 million as of Nov 30, 2019.
Jabil has more than $3 billion of global revolver credit facilities and at the end of the second-quarter, over 90% of these facilities were available. The company exited the quarter with total debt-to-core EBITDA of approximately 1.7 times.
In second-quarter fiscal 2020, Jabil repurchased approximately 1.8 million shares for $72 million as part of a two-year $600 million authorization announced in September 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -22.34% due to these changes.
At this time, Jabil has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Jabil has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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