Buy It?
The good thing about the stock is that the valuation is reasonable despite the steady growth. In general, the outlook on the business is positive. However, short-term investors might be disappointed since the current trend indicates that the stock’s momentum would cool off in the coming weeks.
The company, a leading provider of manufacturing services and solutions, operates in a high-growth sector that offers secular opportunities. Emerging trends in leading industries like automotive and healthcare, such as the widespread adoption of contract manufacturing, bode well for Jabil. The company’s electronics segment has a good clientele, including Apple which accounts for a significant share of its revenues.
Strong Q2
Jabil’s quarterly earnings topped expectations constantly over the past three years, and the trend continued in the third quarter when adjusted income per share rose to $1.99 from $1.72 a year earlier. Net income attributable to the company, including special items, was $233 million or $1.72 per share, higher than $218 million or $1.52 per share reported in the year-ago quarter.
Commenting on the results, Jabil’s CEO Kenny Wilson said, “Our business is in good shape and the Jabil team has executed well this year, in what has been a dynamic operating environment. Our strong year-to-date performance is a testament to Jabil’s strengths, specifically our diversified end-market portfolio and worldwide connected factory network, which enables us to offer unique engineering, manufacturing, and supply chain solutions to our customers across the globe.”
Supporting the bottom-line growth, revenues moved up 2% year-over-year to $8.48 billion. Revenues also came in above the consensus forecast. Among the two operating segments, Diversified Manufacturing Services revenue grew by 13% while Electronics Manufacturing Services contracted by 8%.
Guidance
Encouraged by the positive outcome, Jabil executives raised their full-year 2023 revenue guidance to $34.7 billion, and core earnings per share to $8.50. For the fourth quarter, the company expects revenues in the range of $8.2 billion to $8.8 billion. The outlook for core earnings per share, on an adjusted basis, is between $2.14 and $2.50. Unadjusted operating income is expected to be in the range of $400 million to $460 million in the August quarter.
Jabil’s stock traded above its long-term average consistently over the past few years. Continuing the post-earning rally, the shares traded up 5% on Thursday afternoon.