Why Jabil Circuit (JBL) Is Declining Today

NEW YORK (TheStreet) -- Shares of Jabil Circuit (JBL) fell 22% to $15.30 in trading on Wednesday following an earnings report that missed estimates and after the company announced plans to sell its warranty-repair division.

Jabil posted quarterly earnings on Tuesday of 51 cents a share, below Wall Street estimates of 54 cents. Jabil's sales fell 0.6% for the quarter to $4.6 billion. The electronics company's current quarter doesn't look great, either, as Jabil predicts a decline in sales in two of its three business units.

Along with the earnings report, Jabil announced that it plans to sell its aftermarket services business, which handles warranty repairs, to iQor Holdings for $725 million. The unit was responsible for $1.1 billion in sales in the past year, accounting for about 6% of Jabil's revenue.

TheStreet Ratings team rates JABIL CIRCUIT INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about its recommendation:

"We rate JABIL CIRCUIT INC (JBL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, attractive valuation levels, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 11.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 53.4% when compared to the same quarter one year prior, rising from $82.80 million to $127.02 million.
  • JABIL CIRCUIT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, JABIL CIRCUIT INC reported lower earnings of $1.79 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.35 versus $1.79).
  • In its most recent trading session, JBL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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