Jabil Circuit Inc. (
reported better-than-expected fiscal fourth-quarter 2013 results.
Earnings of 48 cents per share beat the Zacks Consensus Estimate
by a penny, while revenues were well ahead of the consensus mark.
Earnings (including stock-based compensation) increased 10.8%
from the year-ago quarter.
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However, shares dropped 3.71% in after-hours trading due to lower
fiscal 2014 guidance. Jabil noted that a possible disengagement
will negatively impact fiscal 2014 earnings by 28 cents to 34
cents per share. Management also expects revenues to decline in
the first quarter.
Revenues increased 11.0% from the year-ago quarter to $4.81
billion, much better than management's guided range of $4.45
billion to 4.65 billion. The year-over-year growth was primarily
driven by strong performance across all the segments.
Diversified Manufacturing revenues (44.0% of revenues) increased
11.0% year over year to $2.1 billion. The strong year-over-year
growth was driven by better performance from specialized services
and inclusion of 2 months of Nypro revenues.
Enterprise & Infrastructure revenues (29.0% of revenues) were
up 3.0% year over year $1.4 billion. High Velocity (27.0% of
revenues) jumped 21.0% year over year to $1.3 billion (much
higher than 15.0% year-over-year growth expected earlier), driven
by strength in handset volumes.
Gross margin remained flat year over year at 7.3%, primarily due
to unfavorable product mix.
Operating expenses as a percentage of revenues increased 20 basis
points (bps) from the year-ago quarter to 4.1%. Selling, general
and administrative expense as a percentage of revenues increased
10 bps on a year-over-year basis.
As a result, operating margin (including stock-based
compensation) contracted 10 bps from the year-ago quarter to
Net income margin (includes stock-based compensation) remained
flat year over year at 2.1%.
Balance Sheet & Cash Flow
Exiting the fourth quarter of 2013, cash and cash equivalents
were $1.01 billion, down from $1.35 billion in the previous
quarter. Total debt, as of Aug 31, was $1.91 billion compared
with $1.66 billion as of Feb 28, 2013.
Cash flow from operations was $404.0 million compared with $504.0
million in the previous quarter. Capital expenditure was $280.0
million compared with $81.5 million in the previous 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 charges of $188.0 million,
of which $61.0 million were recorded in the third quarter.
Jabil expects to incur restructuring charges in the range of
$105.0 million to $175.0 million during 2014 and $90.0 million to
$29.0 million during 2015. The realignment is estimated to save
$30.0 to $40.0 million in fiscal 2014 and $65.0 million in fiscal
Jabil expects net revenue to decrease approximately 3.0% from the
year-ago quarter to the range of $4.35 billion to $4.65 billion
for fiscal first quarter of 2014.
Revenues from Diversified Manufacturing are expected to increase
7.0% year-over-year, while Enterprise and Infrastructure are
expected to be at par with the year-ago period. High Velocity
revenues are forecast to decrease 25.0% on a year-over-year basis
for the first quarter.
Jabil projects operating income in the $165.0 million to $195.0
million range for the first quarter of 2014. Operating margin is
expected in the range of 3.8% to 4.2%. Jabil expects non-GAAP
earnings to be between 50 cents and 60 cents per share for the
Jabil expects to earn $2.48 (down from earlier projection of
$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).
Management expects cash flow from operations to be more than $1.0
billion for fiscal 2014. Capital expenditures are expected to be
around $250.0 million to $350.0 million for 2014.
We believe that a weak first quarter revenue guidance and lowered
earnings outlook for the full year will remain an overhang on the
stock in the near term. The disengagement with BlackBerry is
expected to negatively impact top line and margins over the next
couple of quarters.
We believe that Jabil will continue to face macroeconomic
headwinds in the near term. Moreover, the company continues to
invest in the diversified manufacturing segment, which will
increase its capital expenditure.
Nonetheless, Jabil's increasing association with
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
compete with the likes of
Currently, Jabil Circuit has a Zacks Rank #3 (Hold).