Jabil Circuit Inc.
) reported disappointing second-quarter 2013 results with both
the top and bottom line lagging the Zacks Consensus Estimate.
Jabil reported earnings (including stock-based compensation and
related charges) of 45 cents per share, a penny shy of the Zacks
Moreover, on a non-GAAP basis, Jabil reported earnings of 53
cents per share, which was down 8.6% from the year-ago
Though revenues for the quarter increased 4.2% from the
year-ago quarter to $4.42 billion, it marginally missed the Zacks
Consensus of $4.43 billion. Revenues were within management's
guided range of $4.3 billion to 4.5 billion.
The year-over-year increase in revenues was primarily driven
by strong performance from the Diversified Manufacturing and
Enterprise & Infrastructure segments, which fully offset a
weak performance from the High Velocity segment.
Diversified Manufacturing revenue (47.0% of the total revenue)
jumped 11% year over year to $2.07 billion (better than
management's outlook of 7% growth). The growth was driven by
continued strength in Specialized Services, which fully offset
weak performance from the Industrial & Clean Tech and
Enterprise & Infrastructure revenue (31% of the total
revenue) was up 12% year over year to $1.36 billion (management
expected the sector to increase by 15.0%). High Velocity segment
revenue (22% of the total revenue) decreased 15% year over year
to $988 million (revenue decline was higher than the forecasted
13% year over year), primarily due to continued weakness in
Gross profit inched up 0.7% year over year to $324.5 million.
Gross margin contracted 30 basis points ("bps") year over year to
7.3%, primarily due to unfavorable product mix.
Operating expenses increased 2.1% year over year to $175.5
million, primarily due to higher research and development
(R&D) expenses (up 22.2% year over year to $7.7 million) and
selling, general and administrative (SG&A) expenses (up 2.2%
year over year to $164.4 million).
Jabil's non-GAAP operating income decreased 3.4% year over
year to $170.2 million, primarily due to a cost of $5 million
associated with Nypro acquisition. Operating margin was 3.9%
versus 4.2% in the year ago quarter. Including stock-based
compensation and related charges of $17.7 million, operating
income came in at $152.5 million.
Jabil's non-GAAP net income was $109.3 million or 53 cents
compared with $123.2 million or 58 cents in the year-ago quarter.
Including stock-based compensation, net income came in at $91.8
million or 45 cents per share.
Balance Sheet & Cash Flow
Exiting the second quarter of 2013, cash and cash equivalents
were $1.06 billion, up from $1.03 billion in the previous
quarter. Total debt, as of Feb 28, 2013, was $1.76 billion.
Cash flow from operations was $154 million compared with $152
million in the year-ago quarter. Capital expenditure was $197.0
million in the quarter. Non-GAAP return on invested capital was
19.9% in the second quarter compared with 24.6% in the comparable
Jabil expects net revenue in the range of $4.3 billion to $4.5
billion for the third 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 forecasted to increase 13.0% on a year-over-year basis for
the third quarter.
However, management expects Diversified Manufacturing segment
to decline 10% sequentially due to multiple product transitions
and volatile macroeconomic concerns. High Velocity is expected to
increase primarily due to ramp up of new handset programs.
Jabil projects operating income in the $165.0 million to
$185.0 million range for the third quarter of 2013. Operating
margin is expected in the range of 3.8% to 4.1%. Jabil expects
non-GAAP earnings to be between 50 cents and 58 cents per share
for the third quarter.
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, the company's association with
) is expected to boost it growth prospects going forward.
The company's recent acquisition and the expansions in China
are expected to hurt margins in the near term. Moreover, the
company provided a tepid guidance for the forthcoming quarter.
Additionally, competition from
) are the other near-term headwinds.
Currently, Jabil Circuit has a Zacks Rank #4 (Sell).
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