Analyst Mark Delaney also increased his price target for Jabil to $20 from $18. "Buying quality EMS companies after severe weakness at key customers has historically lead to outperformance (such as Plexus (PLXS) in 2013)," Delany wrote in his note.
Delaney expects near-term earnings per share will be weak. The analyst expects EPS to reach between $2 and $2.60 a share in 2015 or 2016, however. He also expects Jabil to "generate $2.00-$2.50 in FCF both this year and next (a 16% CY14 FCF yield) and it is the least expensive EMS stock on 2015 EV/EBITDA (trading at 3.5X)."
TheStreet Ratings team rates JABIL CIRCUIT INC as a Hold with a ratings score of C+. The team has this to say about its recommendation:
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"We rate JABIL CIRCUIT INC (JBL) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, increase in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the Electronic Equipment, Instruments & Components industry average, but is less than that of the S&P 500. The net income increased by 11.4% when compared to the same quarter one year prior, going from $105.85 million to $117.92 million.
- JBL, with its decline in revenue, slightly underperformed the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- JBL's debt-to-equity ratio of 0.75 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
- Net operating cash flow has decreased to $117.71 million or 22.51% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, JABIL CIRCUIT INC has marginally lower results.
- You can view the full analysis from the report here: JBL Ratings Report