Jabil (JBL 27.29, -2.79, -9.3%) fell to two-month lows on Tuesday
as investors, despite initially trading the stock higher on the fourth quarter
beat, come to terms with JBL’s in-line guidance for next quarter. Jabil is a design,
manufacturing, supply chain, and product management services company.
Jabil’s fourth quarter was an impressive one. Better than expected net revenue growth of 14.9% to $5.77 bln and a beat on earnings per share (EPS) of $0.70 initially drove shares of JBL higher in the premarket on Tuesday.
Diversified Manufacturing Services segment increased 11% to $2.4 bln, reflecting better-than-expected growth in the company’s healthcare and mobility businesses. DMS represented 42% of total company revenue in the quarter. Core margins for the segment improved 20 basis points year/year to 2.7%.
Jabil’s Electronics Manufacturing Services segment saw revenue growth of 18% to $3.4 bln. Core margins for the segment were 4.4% during the quarter. The strength in both revenue and income was driven by automotive, energy and wireless infrastructure businesses. EMS represented 58% of total company revenue in the quarter.
As to the in-line guidance, first quarter guidance, which includes the adoption of ASC 606, expects DMS segment revenue to increase approximately 5% on a year/year basis to $2.85 bln while the EMS segment revenue is expected to increase approximately 13% on a year/year basis to $3.25 bln. Thus, the company expects total company revenue in the first quarter of fiscal 2019 to be in the range of $5.8-6.4 bln for an increase of 9% at the midpoint of the range. Core EPS for the first quarter is estimated to be in the range of $0.79-0.99 per diluted share.
Management also commented on costs; the company was awarded $2 bln in new business in 2019 and expects to convert that to close to $3 bln by fiscal 2021. The company expects about $15-20 mln of costs pre-revenues in the first half, costs which will hit Jabil before the revenues do. That would be offset by contributions in Q3 and Q4 netting to a total $20 mln contribution in FY 2019.
Investors have piled it on in a session where JBL’s stick fell through both the 50-day simple moving average (28.77) and the 200-day (27.94). What originally began as a positive reaction to the Q4 beat quickly turned lower when investors learned JBL had given only tepid guidance for the coming quarter. By no means does Jabil have a history of guiding higher, but investors seem to be particularly perturbed about this outlook.
- OUR VIEW
- LEARNING CENTER