Jabil Is Uniquely Positioned For Today’s World
Formerly known as Jabil Circuit,
Jabil Inc (NYSE:JBL) is more than a technology company. Jabil is, according to company materials anyway, the most technologically advanced manufacturing services solutions company in the world. Manufacturing services solutions, everything from designing
manufacturing facilities to organizing direct-to-consumer order fulfillment; exactly what businesses around the world need to help them navigate the post-pandemic Which is why it is no surprise Jabil just delivered a blow-out earnings report.
Jabil Inc Blows Past Consensus, Shares Rise
Jabil didn’t just beat the consensus the company blew it right out of the water. I don’t know if this is the largest margin of error I’ve seen recently but it’s up there and highlights a growing trend in the market. The analyst’s estimates are still too low, they don’t reflect economic realities and accelerating trends, and that has the market set up to melt-up even higher than it already has.
Back to Jabil. Jabil defied expectations and produced not only revenue growth in the quarter but double-digit revenue growth. The $7.3 billion reported is up 11.1% from the previous year and outpaces the analyst’s consensus by 16%, enough to make you wonder if they were paying attention at all. GAAP earnings came in at $0.44 a share or $0.04 better than consensus, while core non-GAAP EPS came in at $0.98 or $0.31 better than expected.
Margins fell short of consensus, that’s the only thing I can find fault with, but that was offset by strength in both the primary operating segments. The core Electronics segment saw its revenue grow 8% while the Diversified segment grew 17%. In terms of total revenue, Electronics is worth 61% of revenue while Diversified is about 34% and growing.
"As we exit FY20 and look ahead, I am excited with the momentum underway in our business. Several of our key businesses remain especially strong including Mobility, Healthcare and Cloud. At the same time, we’re permanently transitioning certain components we procure in our EMS segment from the current purchase-and-resale model to a consignment service model," says CFO Mike Dastoor.
The company was able to give guidance if in a wide range. Revenue is expected in the range of $6.7 to $7.3 billion which is just shy of the consensus $7.3 billion. Earnings are expected in a range of $1.15 to $1.35 per share or $.013 to $0.33 above consensus. Regardless, the guidance is calling for growth on a sequential and YOY basis.
Jabil’s Dividend Is Steady And Safe
Jabil has been paying a steady $0.32 annually since 2011 and there is no indication it will stop anytime soon. The yield is only about 1.0% but it comes with such a safety net and valuation it’s hard to pass up. The balance sheet is carrying some debt but is otherwise rock-solid. The company has plenty of cash and plenty of free-cash-flow to continue paying as-is for many years to come. The payout ratio is super-low at 12% so there is room for distribution increases if not an expectation for them. Regarding the valuation, the company is trading about 12X this year’s consensus earnings, a consensus that is far too low. Based on the 2Q results it looks like Jabil is trading about 10X its earnings and offering a deep-value.
Jabil Is Ready To Move Higher
Jabil is one of those stocks that has not recovered all of its pandemic losses quite yet. That’s not great news for old holders of the stock but it is great news for those looking to put new money to work. The 2Q results have share prices moving higher and confirming support at the 30-day moving average. That’s a good sign because it means short-term traders are interested and the bias is bullish.
The indicators are fairly bullish although momentum is still weak. The fact that MACD is bullish and stochastic is showing a strong buy-signal is encouraging. Resistance appears to be at the $34 level now but that could change. If $34 is broken the next target is $35 but a break here would be more significant. If the $35 level breaks down I see this stock moving up to reclaim the all-time high set the first week of 2020. 
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