Jabil (JBL 1.48%) came into 2021 with momentum on its side thanks to an uptick in business activity across several verticals, including healthcare, automotive, connected devices, and mobility. So, it wasn't surprising to see the company raise its fiscal 2021 revenue guidance when it released its fiscal second-quarter results in mid-March.

Jabil's revenue and earnings crushed estimates and the stock surged to its highest levels in two decades after the report. Let's take a closer look at what's working for Jabil and why this stock looks primed for more upside.

Jabil has officially stepped on the gas

Jabil delivered $6.83 billion in fiscal second-quarter revenue, a jump of 11.4% over the prior-year period and comfortably ahead of the $6.57 billion Wall Street estimate. Its core earnings came in at $1.27 per share, up substantially from $0.50 per share in the year-ago quarter and well ahead of the $0.95-per-share consensus estimate.

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CEO Mark Mondello credited this impressive performance to "stronger-than-expected product demand," and also pointed out that the company is carrying "excellent momentum" into the second half of the fiscal year. This is evident from Jabil's updated revenue and earnings guidance. The company now expects $5.00 per share in core earnings this fiscal year on revenue of $28.5 billion.

Jabil was originally expecting $4.00 in core earnings per share for the year on total revenue of $26.5 billion, according to guidance issued in September of last year. It has also updated its core operating margin forecast to 4.2% for the year from its original expectation of 4%. CFO Mike Dastoor touched upon the tailwinds driving these improvements on the latest earnings conference call: "We saw broad-based revenue strength across the business, most notably in mobility, cloud, healthcare, connected devices, automotive, and semi-cap."

Analysts expect Jabil to earn $5.08 per share in fiscal 2021, which would be a nice jump over last year's earnings of $2.90 per share. However, don't be surprised to see the company sustain its strong momentum over the long run, as the markets it is operating in seem destined for secular growth.

Better times ahead

Jabil divides its total revenue into two segments: diversified manufacturing services (DMS) and electronics manufacturing services (EMS). The DMS business is in great form right now, with revenue jumping 26% year over year last quarter to $3.6 billion. It accounted for nearly 53% of total revenue.

The segment's core margins increased 210 basis points year over year to 5.1%. Jabil expects the DMS business to sustain its strong growth rate, with revenue expected to increase 19% year over year in the fiscal third quarter to $3.5 billion on the back of strong end-market demand. The DMS segment's growth will be powered by several catalysts, such as mobility, connected devices, and automotive, among others.

Jabil's mobility business, for instance, is in fine form thanks to the success of the iPhone 12. That's because Apple (AAPL 0.64%) is reportedly Jabil's largest customer, accounting for around 22% of total revenue. Jabil makes casings used in iPhones, and that's good news for the company, as unprecedented demand has led Apple to reportedly increase its production of the iPhone 12 lineup.

What's more, Apple is expected to see a big jump in iPhone sales this year as compared to last year, and analysts believe its sales momentum will carry over into 2022. As such, Apple can give Jabil a nice shot in the arm. The automotive business, on the other hand, is expected to clock 29% revenue growth in fiscal 2021 to $2.2 billion, and Jabil believes that this segment is in its early phases of growth thanks to the increasing adoption of electric vehicles.

Meanwhile, the EMS business addresses other fast-growing verticals like 5G, cloud, networking, and storage, among others. This segment is currently undergoing a transition: Jabil is changing the business model of the cloud division to a consignment-based one in a bid to boost margins. But the good part is that the transition seems to be working, as Jabil now expects $13.4 billion in revenue from the EMS segment versus the earlier expectation of $12.5 billion.

In the end, it can be said that Jabil's fortunes are looking up and the company is on track to deliver strong growth thanks to a collection of different catalysts. Shares of Jabil are currently trading at just 22 times trailing earnings and 11 times forward earnings. This gives investors an opportunity to buy a growth stock at a very reasonable valuation right now before it takes off on the back of the company's improving financial performance.