Jabil Circuit Inc. (
reported mixed third-quarter 2013 results. Although earnings of
48 cents per share beat the Zacks Consensus Estimate by a couple
of cents, revenues marginally lagged the consensus mark.
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Revenues increased 5.1% from the year-ago quarter to $4.47
billion. Revenues were within management's guided range of $4.3
billion to 4.5 billion. On a sequential basis, revenues inched up
1.1% in the quarter.
The year-over-year growth was primarily driven by strong
performance from the High Velocity and Enterprise &
Infrastructure segments, which fully offset a weak performance
from the Diversified Manufacturing segment.
Diversified Manufacturing revenues (40.0% of revenues) decreased
4.0% year over year to $1.8 billion. The decline was primarily
due to lower volume of sales in the Instrumentation and Clean
Tech sectors. Revenues declined 13.0% on a sequential basis.
Enterprise & Infrastructure revenues (31.0% of revenues) were
up 4.0% year over year but remained flat sequentially at $1.4
billion. High Velocity (29% of revenues) jumped 23.0% year over
year to $1.3 billion (much higher than 13% year over year growth
expected earlier). Revenues jumped 31.6% on a sequential basis.
Gross margin contracted 30 basis points ("bps") from the year-ago
quarter to 7.4%, primarily due to unfavorable product mix. Gross
margin expanded 10 bps on a sequential basis.
Operating expenses as percentage of revenues declined 20 bps from
the year-ago quarter to 3.8%. Sequentially, operating expenses
declined 10 bps in the quarter.
Despite the year-over-year decline in operating expenses as
percentage of revenues, operating margin (including stock-based
compensation) contracted 40 bps from the year-ago quarter to
3.6%. Operating income expanded 10 bps sequentially.
Net income margin (net income includes stock-based compensation)
declined 50 bps from the year-ago quarter to 2.2%. Sequentially,
net income margin expanded 10 bps in the quarter.
Earnings per share decreased 11.5% year over year to 48 cents.
However, on a sequential basis, earnings per shares increased
Balance Sheet & Cash Flow
Exiting the third quarter of 2013, cash and cash equivalents were
$1.35 billion, up from $1.06 billion in the previous quarter.
Total debt, as of May 31, was $1.66 billion compared with $1.76
billion as of Feb 28, 2013.
Cash flow from operations was $504.0 million compared with $154.0
million in the previous quarter. Capital expenditure was $81.5
million compared with $197.0 million in the previous quarter.
Non-GAAP return on invested capital was 21.8% in the third
quarter compared with 24.0% in the comparable year-ago quarter.
Jabil has undertaken a restructuring initiative, which is
targeted at realigning its manufacturing capacity and cost base
as per current market conditions and geographic needs. The
realignment is expected to result in $188.0 million charges of
which $28.0 million were recorded in the third quarter.
Jabil forecasts that approximately $60.0 to $70.0 million of
these charges will be recorded in the fourth quarter. The
remaining portion will be incurred during 2014 and 2015. The
realignment is estimated to save $30.0 to $40.0 million in fiscal
2014 and $65.0 million in fiscal 2015.
Jabil expects net revenue to increase approximately 5.0% from the
year-ago quarter to the range of $4.45 billion to $4.65 billion
for the fourth quarter of 2013. Revenues from Diversified
Manufacturing and Enterprise and Infrastructure are expected to
be at par with the year-ago period while High Velocity revenues
are forecast to increase 15.0% on a year-over-year basis for the
Jabil projects operating income in the $165.0 million to $185.0
million range for the fourth quarter of 2013. Operating margin is
expected in the range of 3.7% to 4.0%. The company expects the
Enterprise and Infrastructure segment to report an operating
margin of 3.0% in the upcoming quarter.
Jabil expects non-GAAP earnings to be between 50 cents and 58
cents per share for the fourth quarter. Jabil expects cash flow
from operations to be more than $1.0 billion for fiscal 2013.
Capital expenditures are still expected to be around $700.0
million for 2013.
Jabil expects to earn $2.77 in fiscal 2014, driven by strong
growth from the Nypro acquisition (16 to 22 cents), restructuring
benefits (11 to 15 cents) and organic growth (11 to 31 cents)
based on market share gains, new business wins, successful
program launches and reasonable improvements to end-market
We believe that Jabil will continue to face macroeconomic
headwinds in the near term. The company continues to invest in
the diversified manufacturing segment, which will increase its
capital expenditure. Nonetheless, Jabil's increasing association
is expected to boost its growth prospects going forward.
Additionally estimated strong growth from the Nypro acquisition,
restructuring benefits and new customer wins will help Jabil to
Benchmark Electronics (
Currently, Jabil Circuit has a Zacks Rank #3 (Hold).