Jabil's (JBL 2.14%) stock recently plunged along with the broader market after the electronics manufacturing company posted weak second-quarter numbers and pulled its full-year outlook.

Jabil's revenue rose 1% annually to $6.13 billion, but missed estimates by $60 million. Its non-GAAP core earnings declined 22% to $78.1 million, or $0.50 per share, which missed estimates by $0.17. On a GAAP basis, it reported a net loss of $3.3 million, compared to a profit of $67.4 million a year earlier.

Jabil claimed that dealing with the novel coronavirus outbreak increased its operating expenses by $53 million during the quarter. It also withdrew its prior full-year guidance, which called for 6% revenue growth and 21% growth in core earnings, due to the "rapidly changing" novel coronavirus pandemic.

Apple's iPhone 11.

Image source: Apple.

Those soft numbers weren't surprising, since Apple (AAPL -0.60%) -- which accounted for 22% of Jabil's revenue last year -- also pulled its guidance in February. Jabil's forward valuations are no longer reliable, but the stock still looks dirt cheap at less than one times its annual revenue. Is this battered stock still a worthy turnaround play?

What does Jabil do?

Jabil's electronic manufacturing services (EMS) unit, which accounted for 61% of its revenue last year, produces products for the automotive, industrial, cloud, defense, energy, telecom, retail, and smart home markets.

Its diversified manufacturing services (DMS) unit, which generated the remaining 39% of its revenue, manufactures products for the material sciences, technology, and healthcare sectors. This closely watched division produces casings for Apple's iPhones and iPads. Here's how those two businesses fared over the past year.

YOY revenue growth

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020



















YOY = Year-over-year. Source: Jabil quarterly reports.

During the Q2 conference call, CEO Mark Mondello claimed Jabil got off to a "nice start" in fiscal 2020 before the coronavirus crisis escalated. Despite those disruptions, CFO Mike Dastoor noted the EMS business was buoyed by "additional strength" in the semiconductor capital equipment industry, and the DMS business experienced "good demand" from the healthcare and mobility markets.

Dastoor stated that Jabil's ability to meet market demand was "greatly diminished" by virus containment efforts in China, which reduced its plant utilization rates to 45%-50% in mid-February. However, that percentage rose to roughly 80% by the end of the quarter, indicating that the worst could be over for its Chinese plants.

Focusing on free cash flow and lower expenses

Unfortunately, demand for Jabil's services will likely drop off a cliff as the coronavirus crisis throttles orders across multiple markets. But Dastoor noted that when "demand falls and revenue goes down," the company's "working capital from a dollar standpoint actually improves." That's why Dastoor didn't alter Jabil's earlier free cash flow (FCF) guidance of $400 million to $500 million for 2020, which would only mark a slight decline from its FCF of $503 million in fiscal 2019.

Jabil also continued the restructuring plan it announced last September. That plan, which targets $25 million in savings in 2020 and $40 million in additional savings in 2021, will optimize its manufacturing footprint as it deals with slower orders.

Jabil incurred $30 million in restructuring and severance charges during the quarter, as well as a non-cash impairment charge of $12 million from the sale of an investment, so its reported operating margin dipped annually from 2.5% to 1.5%. However, Jabil still expects its restructuring plan to bear fruit in the second half of 2020 -- which could help it tread water until the crisis ends.

But is Jabil a worthy investment?

Jabil's business should recover quickly after the crisis ends and Apple introduces new iPhones. But at this point, it's impossible to tell when the headwinds will fade, and Jabil's slowdown could worsen throughout 2020. Therefore, investors should simply buy Apple -- instead of Jabil or its other stagnating suppliers -- as a potential turnaround play in this brutal market.