The Bottom Is In For Jabil, Inc, But Don’t Buy It Yet

Jabil Pops On Earnings Beat And Outlook, Analysts Are Silent 

Jabil, Inc (NYSE: JBL) is benefiting from secular tailwinds and strong demand in all end-markets and that has shares up more than 7.0% following the FQ2 results. The problem, for us, is that price action after the pop is a little bearish and the analysts have yet to say anything. We’re confident they will but there is always a chance it won’t be what the market wants to hear and that is giving us pause. Add to that some institutional selling and we see a chance for share prices to move lower and test for solid support before they start moving higher. That said, Jabil is a great company in an industry we want to own and it is trading at a discount to the broad market. Assuming price action confirms support when and if it moves lower we think the stock would be buyable, we just want to see some follow-through in the market before we commit anything to it. 

Jabil Has Solid Quarter, Guides Higher 

Jabil had a solid quarter with revenue of $7.55 billion up 10.5% from last year and 150 basis points better than the Marketbeat.com consensus estimate. The revenue was driven by strength in both operating segments with the Electronics Manufacturing segment up 19% and the Diversified Manufacturing Solutions segment up a smaller 4.0%. Moving down, the better news is that margin is improving and better than expected at both the gross and operating levels. On the bottom line, the adjusted $1.68 beat the consensus by $0.21 and lead the company, along with the market outlook, to raise the guidance. 

Jabil raised the guidance for both the coming quarter and the full-year 2022 higher. The company is now looking for Q3 revenue in a range with $7.90 billion as the low end compared to the $7.69 expected by the analysts and there is strength in the earnings guidance as well. For the full year, revenue is expected to be at least $32.6 billion compared to the $31.85 consensus and there is considerable room in the range for an even bigger margin of outperformance. 

The Analysts Are Mum But Rate Jabil A Buy 

The analysts have yet to make a comment about Jabil’s strong showing and positive guidance but it is only a matter of time before they do. Until then, the Marketbeat.com consensus rating is a firm Buy leaning toward Strong Buy and it has been trending higher over the past year. The consensus price target has also been trending higher and is 25% above the price action as of mid-March 2022. The last five analysts' notes, the most recent came out in December, include two upgrades and five price target increases including activity from Bank of America, Raymond James, Goldman Sachs, and Citigroup.  

The Technical Outlook: Jabil Pops On Results, Gains Capped 

Shares of Jabil popped more than 10% in the wake of the earnings report and opened with a large price gap but action has been bearish since. The pop in prices was capped by resistance at $62 and well below our target for strong resistance. Assuming the market continues to decline from these levels, we see the stock moving down to the exponential moving average at $58.20 and possibly lower. If support is confirmed at the moving average a move up to retest and break through the $62 level could lead the stock up test resistance at $67 and then the consensus price target near $75.