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Jabil Circuit (JBL) Benefits from Apple's Growth; Time to Buy?

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We issued an updated research report on Jabil Circuit Inc.JBL on Oct 1, 2015.

The company reported strong fourth quarter fiscal 2015 results with both earnings and revenues outpacing the respective Zacks Consensus Estimate.

In the reported quarter, Jabil primarily benefited from the strong demand for Apple AAPL devices especially the larger-screened iPhones. As a result of the solid demand, Apple contributed about 24% of the company's revenues in 2015 in contrast to 18% in 2014. This apart, in fiscal 2014, the company had completed a comprehensive restructuring program to optimally reallocate manufacturing resources. This not only allowed the company to realign its manufacturing capacity and cost base in tune with market conditions and demographic requirements but also led to robust improvement in Jabil's operating margin in fiscal 2015 itself.

All this has allowed the company to position itself well to pursue growth opportunities, going forward. In fiscal 2015, Jabil's cash flow from operations increased to a robust $1.24 billion from $882.9 million in 2014. Jabil also acquired Plasticos Castella for $110 million in the fourth quarter 2015, which complements Nypro's rigid packaging business, a part of the company's DMS segment.

At the end of the fiscal, Jabil had cash and cash equivalents of $913.9 million while long-term debt stood at $1.35 billion.

However, intensifying competition, macroeconomic headwinds and increasing investments in diversified manufacturing remain concerns. Additionally, we are concerned about the company's exposure to customer concentration risk, with its top five customers accounting for a major portion of its revenues. Given the competitive nature of the industry, the loss of any one of its key customers would severely impact the company's results.

Nonetheless, we believe with Apple as its largest customer, the rising demand for iPhones should aid this Zacks Rank #1 (Strong Buy) company's results at least in the near term. The company's encouraging first quarter and fiscal 2016 guidance also reaffirms this.

Also, over the last 7 days, a positive estimate revision has led to an increase in the Zacks Consensus Estimate for fiscal 2016 by 17% to $2.27 while the same for fiscal 2017 rose 17.6% to $2.41, thereby making the stock more attractive.

Stocks to Consider

A couple of other stocks worth considering in the broader tech space include Amazon.com, Inc. AMZN and eBay Inc. EBAY , each having a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

EBAY INC (EBAY): Free Stock Analysis Report

JABIL CIRCUIT (JBL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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