How Jabil Circuit Can Push Higher

On Wednesday, Jabil Circuit (NYSE: JBL  ) will release its latest quarterly results. Even though the tech manufacturer has tried to emerge from the shadows by diversifying beyond its largest customer, Jabil still faces plenty of competition from other companies seeking to stand behind some of the most popular products in technology.

Jabil Circuit is one of many companies focusing on making components for other businesses, giving up its own chance at the limelight in order to facilitate production for its customers and their innovative technological products. But with the nature of the contract-electronics business being fairly cutthroat, Jabil has to be on guard constantly to protect and preserve its lucrative relationships with its customers. Let's take an early look at what's been happening with Jabil Circuit over the past quarter and what we're likely to see in its report.

Stats on Jabil Circuit

Analyst EPS Estimate

$0.54

Change From Year-Ago EPS

(16%)

Revenue Estimate

$4.4 billion

Change From Year-Ago Revenue

3.6%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

How Jabil Circuit can push earnings back in the right direction
Analysts have gotten less optimistic about Jabil's earnings prospects recently, reducing their estimates for the May quarter by $0.08 per share and their full-year fiscal 2013 consensus by double that figure. The stock has done a good job of treading water, though, rising about 2% since mid-March.

Jabil is best known for its production of the aluminum case that houses the iPhone 5. The company has done its best to try to diversify away from its smartphone focus, with its purchase of plastics-maker Nypro aiming to help it move more broadly into consumer electronics as well as the unrelated field of health care. Yet Jabil's diversified manufacturing services segment produces by far the most impressive margins for the company, highlighting its continued reliance on the business.

As a result, the big threat that Jabil constantly faces is the potential loss of its customers. Rival Flextronics (NASDAQ: FLEX  ) suffered a huge hit last summer when major customer BlackBerry (NASDAQ: BBRY  ) chose to stop using the company to help it make its namesake smartphones, citing cost-cutting efforts in its decision to make changes to its supply chain arrangements. Flextronics has seen substantial revenue declines as a result, even despite BlackBerry's relative weakness in the smartphone space in recent years. More importantly, the move came at the worst possible time, as BlackBerry has subsequently revived in the face of its latest product launch. Jabil counts BlackBerry as a customer as well, so it should be interesting to see how that relationship has developed in the wake of the Z10 and Q10 smartphone releases.

One area where Jabil is looking to make improvements is in labor costs. The company has cited rising costs in China as one reason why it has boosted its workforce in neighboring Vietnam, with plans to triple the number of workers it has in its Ho Chi Minh City factory over the next couple of years.

In Jabil's quarterly report, look beyond the iPhone to see how the company's business producing networking equipment is performing. With some recent good news in the networking space, success for Jabil's customers in the segment could lead to better results for Jabil as well.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Click here to add Jabil Circuit to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2013, at 3:34 PM, jargonific wrote:

    Then Flextronics became the company selected to build technology for APPLE in the States. Not bad Flex.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2492779, ~/Articles/ArticleHandler.aspx, 11/28/2014 7:42:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement