This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Jabil Circuit's Strong Margins Make It a Buy Ahead of Earnings

Stocks in this article: JBLAAPLCSCOBBRY

NEW YORK (TheStreet) -- Contract-electronics manufacturer Jabil Circuit (JBL) will report fiscal third-quarter earnings on after the market close on Wednesday.

The stock is trading around $20, up 14.5% for the year to date. With a price-to-earnings ratio of 16, which is 1.5 points below the industry average, there is very little downside risk to owning these shares.

Jabil, which is known for supplying electronics components to (among others) Apple (AAPL) and Cisco (CSCO), has all of the makings of an impressive turnaround story. Industry experts are projecting improved IT spending in the next several quarters, which means Jabil can reach $22 in the next six to 12 months. This is not just a one-year story, however.

There are also signs Jabil's earnings will grow impressively starting in 2015. Analysts have begun to take notice. On Wednesday, I expect the company to deliver sequential improvements on earnings-per-share, revenue and margins.

Wall Street will be looking for a loss of 9 cents per share on revenue of $3.60 billion. After several quarters of weak revenue, I'm expecting Jabil to return to growth across its entire business line. With Apple accounting for 20% of Jabil's revenue, I also expect the company's operating margin to improve.

Since the start of 2014, the company's shares of have had little direction, moving in a very tight range between $17 and $18. The stock has now begun to break out but for now are still cheap.

During the conference call investors will need to pay special attention to what management says about Jabil's diversified manufacturing services (DMS) business. This is the company's strongest segment and accounts for roughly 40% of its business.

Over the past couple of years, as Apple has grown its iPhone relationship with Jabil for things like iPhone 5 casings, the DMS segment has grown more prominently. With the strong demand now projected for the iPhone 6, it makes sense to assume a commensurate effect on Jabil's top-line in the next several quarters. And this will bode well for the stock. But Jabil hasn't always been this easy to read.

Analysts took some jabs at the company's management upon learning Jabil had ended its relationship with BlackBerry (BBRY). But as I wrote several months ago, it was only BlackBerry. It's not as if BlackBerry was contributing to Jabil's growth. Had this occurred a decade ago it would have been a much different story.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,614.81 +215.14 1.31%
S&P 500 1,941.28 +37.27 1.96%
NASDAQ 4,419.4780 +103.4040 2.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs