It has been about a month since the last earnings report for Jabil (JBL). Shares have added about 5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Jabil’s Q1 Results Benefit From Strong EMS Performance
Jabil 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.
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.
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.
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.
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 6.74% due to these changes.
At this time, Jabil has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Jabil has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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