Jabil Circuit Sends Mixed Message

Jabi Circuit reported its fiscal fourth-quarter results after Monday's close, topping Wall Street's earnings expectations despite a slight miss on the top line.
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TheStreet

) --

Jabil Circuit

(JBL) - Get Report

reported its fiscal fourth-quarter results after Monday's close, topping Wall Street's earnings expectations despite a slight miss on the top line.

The St. Petersburg, Fla.-based provider of electronics manufacturing services said its core earnings surged to $112.1 million, or 52 cents a share, for the three months ended August 31. That's up from a year-ago equivalent profit of $33.4 million, or 16 cents a share, and ahead of the average estimate of analysts polled by

Thomson Reuters

for earnings of 48 cents a share in the August period.

Revenue, however, came in at $3.86 billion for the quarter vs. the consensus view of $3.89 billion. The company noted its core operating margins were above 4% for the period "as we continue our push into differentiated services and a more cost effective operating model."

Jabil's outlook for its fiscal first quarter ending in November was a similar story. The company forecast core earnings of 53 to 57 cents a share, providing plenty of upside to Wall Street's current view of 53 cents, but it projected revenue in a range of $3.9 billion to $4 billion, shy of the $4.1 billion average analyst estimate.

"As underlying demand trends appear to be stable, our continuing penetration into high growth markets and differentiated services are driving continued revenue growth and margin expansion," said Timothy Main, Jabil's president and CEO, in a statement. "Expectations for our first fiscal quarter of 2011 place the company on path to post another record year in fiscal 2011," Main said.

It's been a fairly rocky road of late for Jabil's stock, which is down almost 22% overall in 2010. The shares reached a 52-week high of $18.49 on March 23 but have been weak since, scraping a low for the year of $10.17 on August 31. The stock has rallied along with the broad market in September, and it added 2.4% in Monday's regular session to close at $13.89, pulling back after peaking above $14 for the first time since August 5.

Volume of 9.5 million was more than double the issue's trailing three-month average of 4.3 million, and Tuesday's session should see more volatility as Wall Street tries to sort out the takeaway from the numbers. The latest read in extended trading had the stock down 2% already, according to

Yahoo Finance

.

Collins Stewart issued a research note to clients last week saying the stock should see a relief rally after the fourth-quarter report. The firm, which has a buy rating and a $21 price target on the shares, was expecting in-line results for the period.

"With expectations and valuation low headed into the print, in-line results (which we expect) should remove some uncertainties and could help the shares move 5-10% higher near-term," Collins Stewart wrote on Sept. 23, when the stock closed at $12.68. "The shares are cheap, currently trading at just over 6X our $2.08 FY11 EPS est., drastically below JBL's historical 12x-17x range, more than discounting potential issues and concerns.

The majority of other analysts shared Collins Stewart's bullishness ahead of the report with 13 of the 17 covering Jabil's stock rating it as a buy (7) or strong buy (6), and the median 12-month price target at $18.50.

Jabil's fellow electronics manufacturing services companies, include

Flextronics

(FLEX) - Get Report

, and

Sanmina-SCI

(SANM) - Get Report

, which are down 18.5% and up almost 7% respectively so far in 2010.

Flextronics is expected to report its fiscal second-quarter results on Oct. 27, while Sanmina-SCI is slated to release its fiscal fourth-quarter numbers on Nov. 1.

--

Written by Michael Baron in New York.

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