Jabil Inc Moves Higher On Rising Demand

Perfectly Positioned Jabil Inc Exceeds Expectations

In a world play by ramping production, semiconductor shortages, and supply chain issues Jabil Inc NYSE: JBL is perfectly positioned. The company is a leader in the field of integrated circuit design and advanced electronics manufacturing making it the go-to name for anyone with an electronic-oriented manufacturing need. Hmmmmm,  who could possibly need assistance with electronics-oriented manufacturing today? In our view, that includes just about everyone because nearly every product we use today contains a semiconductor or was made via the aid of semiconductors and digital technology.

Jabil Inc Exceeds The Analyst Forecasts

Jabil Inc not only reported a great quarter but one in which revenue and year-over-year growth accelerated on a sequential basis. The $7.20 billion in consolidated revenue is up 13.7% from last year, 17% in the two-year comparison, and beat the consensus by 360 basis points. The company reports strength in both segments, the Diversified Manufacturing Services segment grew 21% from last year and Electronics Manufacturing Services Group by 8%. 

“Our third-quarter performance was outstanding,” said CEO Mark Mondello. “The combination of strong demand and excellent execution by the team allowed us to deliver $277 million in core operating income on revenue of $7.2 billion,” he added.

Moving down the report, the company was able to lever the revenue gains for an improvement of 60 basis points in gross margin. The combination of revenue strength and margin improvement helped drive operating income up by 300% and reverse bottom-line losses into profits. On the bottom line, the GAAP EPS of $1.12 compares to a loss of $0.34 last year and beat the consensus by  $0.29.

Looking forward, Jabil is expecting business strength to continue and has upped guidance because of it. The company is expecting fourth-quarter revenue in a range of $7.30 to $7.90 billion versus the consensus of $6.96 billion. The guidance is forecasting sequential revenue growth of 1% at the low end and 11% at the high end and we think investors should expect the company to hit the high end of this range if not beat It. As for earnings, the company is expecting $1.25 to $1.45 versus the consensus $1.17 which puts the company firmly on track to beat the full-year consensus target as well.

“I’m confident in our plan. As a result, we are raising our financial outlook for the balance of the year. We now expect FY21 revenue to be in the neighborhood of $29.5 billion, with core EPS of approximately $5.50,” added Mondello.

The Analysts Aren't Paying Attention To Jabil Inc

The analysts are largely not paying attention to Jabil Inc. The most recent chatter came out in the wake of the Q2 earnings report and even that was kind of light. The consensus rating is a buy with a downward bias and a price target near $55. That price target is in line with the current price action but doesn't reflect the most recent activity which puts the stock closer to $65 or $70. JPMorgan recently mentioned the stock in a note about the IT Hardware sector reiterating its buy Overweight rating but noting the lack of obvious catalyst. We don't know how obvious it needs to be, but the company's revenue and earnings strength is a catalyst for us.

The Technical Outlook: Jabil Inc Confirms Resistance At DOT.com Era Level

Shares of Jabil Inc surge in premarket action following the report and set a new high shortly after the open. It didn't take long for the bears to step in however and confirm resistance near a level set during the .com bust. That just goes to show how long of a memory the market actually has. In the near term, this stock may face some downward pressure, but we see it developing into a buying opportunity. The company's revenue and earning strength are building and should drive the stock to a new high.