Based on the latest results, Jabil NYSE: JBL can manufacture new highs in 2023. The company continues to fire on all cylinders driving better-than-expected performance, healthy cash flows, and capital returns. While share repurchases have slowed this year, the company’s financial position is better than ever, suggesting they could resume anytime. Until then, the share count is down more than 5.5% YOY, helping to support the price action.
The price action is going ballistic, and there is a chance for a correction, but the analysts and institutional activity suggest any price weakness will result in a buy signal.
Marketbeat.com is tracking 7 analysts with current ratings, and they have the stock pegged at Buy. The community has yet to comment on the Q3 results and guidance for Q4 but rest assured; comments are coming. The results and guidance are better than expected, so they should result in upward price target revisions if not outright upgrades.
Until then, the analysts see the stock as slightly overvalued, trading at $105, but the consensus target is trending higher and up 25% in the last 12 months. The most recent targets, which came out days before the Q3 release, are well above consensus at $105 and $108, suggesting that a little more upside is possible.
Jabil Has Solid Quarter: Guides Higher
Jabil had a solid quarter proving the validity of its diversified nature and global network of connected manufacturing facilities. The company posted $8.5 billion in net revenue for a gain of 1.8% compared to last year. The revenue beat the Marketbeat.com consensus by 360 basis points due to strength in the Diversified Manufacturing Services segment. It grew by 13% and was offset by an 8% decline in Electronic Manufacturing Services.
Margins widened, aiding the surge in share prices, and left the GAAP and adjusted earnings above consensus. The $1.99 in adjusted earnings is up 15% compared to last year, and the guidance is also strong.
The guidance is what has the market up as strongly as it is. The company forecasted Q4 revenue in a range slightly below consensus given the Q3 strength, but the earnings are strong. The adjusted EPS guidance expects $2.14 to $2.50 in earnings, which compares well to the $2.16 consensus figure.
The Sell-Side Is Buying Jabil
The analysts think Jabil is a Buy, which is what the institutions have been doing. The institutional activity is mixed but bullish on balance for the past 4 quarters, and buying has been ramping the last 3 while selling diminishes. The net of activity is institutional ownership near 88.5% and growing. Their activity may slow, given the price spike, but upward momentum is apparent. Pullbacks in the price action, specifically to generally accepted support targets, are likely entry points for new money to enter the market.
The chart is as good as it can be. The price action is trending upward and going ballistic with the Q3 news. The move looks strong and will likely continue, but there is a risk in jumping in now. The stock is well above its moving averages, and any acceptable support targets and ripe for a correction. When and if that happens is anybody's guess. The best-case scenario for investors is a consolidation that produces a bullish signal. The worst case is a top and reversal that keeps the market range bound at current or lower levels.
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