The manufacturing industry is going through a transformation, with new technologies and widespread digitization — which accelerated during the pandemic — changing the way businesses operate. For manufacturing services provider Jabil, Inc. (NYSE: JBL), currently innovation is the main priority as it looks to stay relevant and meet diverse customer needs.
The Detroit-based company, which is also a leading player in electronics manufacturing services, witnessed steady growth in the latter part of 2020, after recovering from the initial slowdown that followed the virus outbreak. Revenues and earnings topped expectations in each of the trailing four quarters. Despite the company’s market value nearly doubling since last year, the stock looks reasonably valued. It offers a good investment opportunity, especially for those following the buy-and-hold strategy.
Buy JBL?
For shareholders, this is the right time to increase their holdings because the bullish outlook on the stock is yet to be fully factored into the price. It is expected to cross the $60-mark in the coming months, which is in line with the company’s impressive growth prospects. Recently, Jabil executives lifted their full-year outlook to reflect the continuing momentum.
Read management/analysts’ comments on Jabil’s Q2 earnings
Jabil serves multiple industries – including technology, automotive, and healthcare that witnessed a spike in activity in recent months – offering services ranging from digital prototyping and circuit designing to supply chain designing and manufacturing infrastructure. The company operates through the segments of Diversified Manufacturing Services and Electronics Manufacturing Services that contribute equally to the top-line. The tailwinds that drove growth so far are being carried forward into the second half of the year.
Top Clients
Apple (NASDAQ: AAPL) continues to be the largest customer, accounting for more than a fifth of Jabil’s total revenue. The other important clients include Amazon (NASDAQ: AMZN) and Tesla (NASDAQ: TSLA). While the iPhone’s maker’s successful product launches bode well for Jabil, heavy dependence on a few big customers for revenue generation is the main risk facing the company. As part of exploring new revenue streams, it acquired Ecologic Brands earlier this year to enhance its sustainable packaging platform.
Today, our business is wide-ranging and resilient. This is especially true when any individual product or product family is faced with a macro disruption or cyclical demand. Furthermore, our current business mix provides a unique set of capabilities, innovative capabilities openly shared across the enterprise with speed and precision as we simplify the complex for our customers. It’s a proven formula that’s trusted by many of the world’s most remarkable brands.
Mark Mondello, chief executive officer of JabilOn Growth Path
Second-quarter earnings more than doubled to $1.27 per share and beat estimates by a wide margin even as revenues rose 12% to $6.82 billion, which also topped expectations. When the company unveils its third-quarter statistics on June 15, before the opening bell, the market will be looking for earnings of 1.04 per share, which is more than double the profit recorded a year earlier.
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This week, Jabil’s stock traded at the highest level in more than two decades, after gaining about 86% in the past twelve months. The shares closed the last trading session at $55.60, up 0.42%., which is well above their 52-week average price.