Earnings preview: End-markets strength to drive Jabil Q2 results

Jabil Inc (JBL) is scheduled to report its second-quarter earnings results on Thursday after the market closes. All the business segments are likely to experience positive momentum that in turn stand beneficial for the quarterly performance. The strength in end-markets like automotive, cloud, healthcare and 5G wireless could drive the results.

The top line is likely to benefit from growth in both Diversified Manufacturing Services (DMS) and Electronics Manufacturing Services (EMS) segments. However, the DMS segment will face softer demand in its mobility business while new business awards could benefit the EMS segment as the company continues to capture share across desired end markets.

The company has prioritized areas for achieving continued success for the balance of the year through end market and product diversification, the ramp of new business awards, and financial performance. The blend of the company’s revenues has become better balanced and less dependent on any single product or product family.

Analysts expect Jabil to report earnings of $0.61 per share on revenue of $6.1 billion for the second quarter. In comparison, during the previous year quarter, the company posted a profit of $0.66 per share on revenue of $5.3 billion. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $30.22 per share in the next 52 weeks.

In the cloud space, Jabil believes its revenue run rate to be in the range of $250 million a quarter as it exits the fiscal year 2019. The company remained focused on delivering $3 in core earnings per share and $25 billion in revenue, with adjusted free cash flows in the range of $350 million for the year. Over the long-term, Jabil remained focused on delivering shareholder value through strong margins, free cash flow, and earnings growth.

Also read: Jabil earnings conference call transcript

For the first quarter, Jabil posted a 94% jump in earnings on positive momentum across all of its business segments. A 10% increase in revenue from DMS and a 22% growth in EMS revenue drove revenue higher by 16.5% for the quarter.

For the second quarter, the company had expected net revenue in the range of $5.8 billion to $6.4 billion and earnings in the range of $0.20 to $0.48 per share. Core earnings were anticipated to be in the range of $0.51 to $0.71 per share. DMS revenue was predicted to rise 6% and EMS revenue was expected to grow by 23% from the previous year.

Shares of Jabil opened higher on Wednesday and is trading in the green territory. The stock has fallen over 2% in the past year while it has risen over 20% in the past three months.

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