Shares of Jabil Circuit ( JBL - Get Report) rose11% Wednesday after the contract manufacturer beat earnings estimates and offered a positive outlook. Nevertheless, some analysts were skeptical of the rally.

Jabil reported net income on Tuesday for its second quarter of $15.3 million, or 8 cents a share, above estimates it would earn 7 cents a share, according to Thomson Financial/First Call. Jabil said base-operating margins would improve by a full percentage point this quarter -- a fairly large increase in the mass-production contract manufacturing field.

The nagging problem for electronic manufacturing services providers is their inability to predict whether or when IT spending will rebound. In a survey of chief information officers, Goldman Sachs reported last week that a majority of them do not think normal spending is going to return until 2003 or beyond.

Some analysts said Jabil's stock got ahead of itself Wednesday. "This is an overreaction to what they said last night," said Tony Boase, an analyst at A.G. Edwards.

How Good Is It?

With a recovery in capital spending looking increasingly less likely this year, some say expecting Jabil to thrive in 2002 requires more than the usual optimism. "The thing is, 50% of Jabil's revenue is tied to communications infrastructure," said Boase. "For the company to have a meaningful rebound, that group is going to have to stabilize or come back."

Other analysts said Jabil's outlook at least indicated the worst is over. The company said it expects fiscal third-quarter revenue of $825 million to $855 million and cash earnings of 11 cents to 13 cents a share. For the year, the company expects revenue at the lower end of a range of $3.5 billion to $4 billion and cash earnings per share of 45 cents to 50 cents.

"I think it is positive that they're talking about an up quarter, in terms of revenue, for the first time in four quarters," said Todd Coupland, an analyst at CIBC World Markets. "Given the company's operating leverage, a little bit of revenue improvement can add a lot to the bottom line."

New Business

In a statement, Tim Main, the chief executive of Jabil, said: "We expect to see a gradual improvement in overall business levels through the balance of 2002. We are most encouraged by recent new wins on the organic as well as divestiture front, positioning us well for a much improved fiscal 2003."

Jabil reported a number of customer wins, including Cisco ( CSCO) and Hewlett-Packard

Still, Jabil's non-GAAP results were down 63% from $41.8 million, or 21 cents a share, a year ago, and they exclude amortization of intangibles, acquisition and merger-related charges, and restructuring charges. On a GAAP, or generally accepted accounting principles basis, earnings were $3.7 million, down 90% from $40.7 million last year.

"To suggest that 2003 is going to be a breakthrough year makes sense logically," said Boase. "But a lack of visibility does not allow the company to say that it's going to happen with certainty."