Monday, June 20, 2011

Jabil Circuit Inc. (NYSE: JBL): Q3 Earnings Preview 2011

Jabil Circuit Inc. (NYSE: JBL) is scheduled to release its fiscal third-quarter earnings after the closing bell on Tuesday, June 21, 2011. Analysts, on average, expect the company to report earnings of 57 cents per share on revenue of $3.91 billion. In the year ago period, the company reported earnings of 40 cents per share on revenue of $3 billion.

Jabil Circuit, Inc., together with its subsidiaries, provides electronic manufacturing services and solutions in the Americas, Europe, and Asia. It offers electronics and mechanical design, production, product management, and after-market services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage, and telecommunications industries. Jabil operates in three segments: Diversified Manufacturing Services (DMS), Enterprise & Infrastructure (E&I) and High Velocity Systems (HVS).

In the preceding fiscal-second quarter, the St. Petersburg, Florida-based company's net income was $55.4 million, or 25 cents per share, compared to $29.8 million, or 14 cents per share, in the year-ago period. On an adjusted basis, the company earned 54 cents per share in the second quarter. Revenue rose to $3.93 billion from $3.00 billion in the same period last year. Analysts, on average, expected the company to report earnings of $0.55 per share on revenue of $3.96 billion.

At its last earnings call in March, the company said that it expects fiscal third quarter net income of 44 cents to 48 cents per share, with core earnings anticipated in the range 55 cents to 59 cents per share. Revenues are forecast in the range of $4.1 billion to $4.2 billion. The company said that continued focus on diversification and a differentiated business model will help the company grow throughout fiscal 2011. The forecast includes results from recently acquired sites in Italy and France but excludes the impact of potential supply disruptions from the earthquake and tsunami that hit Japan's northeast coast on March 11. Jabil's employees at a site in Gotemba, Japan, were not directly affected, but the disaster may impact its parts suppliers. Reflecting on the recent catastrophe in Japan, Jabil said the disaster may affect the supply of components to its global manufacturing operations, but the quantum of impact is not measurable as of now. 

Jabil is expecting a record-setting year for earnings and revenue, has been benefiting from an overall rebound in demand for electronic devices. Chief Executive Timothy L. Main in December said the company was seeing good momentum across its segments. According to Tim Main, Jabil could be a $20 billion company with operating margins significantly above industry averages by FY 2014 or 2015.

Jabil has benefited from new business wins from major original equipment manufacturers (OEMs) such as Cisco Systems Inc. (NASDAQ: CSCO), a recovery in end-market demand, new programs ramping up and resurgence in IT enterprise spending. Jabil has also benefited from strong growth in the Mobility, Aerospace and Defense, Healthcare, Instrumentation and Industrial, and Networking and Storage segments over the long term. However, intense competition from Benchmark Electronics (NYSE: BHE), Flextronics International Ltd. (NASDAQ: FLEX) and Celestica Inc (NYSE: CLS) and a softer demand environment may continue to weigh on company's results. Also, Jabil’s fairly high level of debt may limit financial flexibility going forward.

Recently, shares of the company slumped after Research in Motion said revenue may miss analysts’ estimates as it loses market share to rival Apple Inc. The BlackBerry smartphone maker contributed 15 percent of Jabil’s revenue in the fiscal year ended Aug. 31, according to a regulatory filing in October.

Full Disclosure: None.
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