What happened
Electronics manufacturing expert Jabil (JBL -0.31%) saw share prices dip as much as 7.6% lower on Thursday morning, following the earnings report for the second quarter of fiscal year 2023. The stock started to climb back from that early-morning trough, showing a milder 3.5% haircut by 12:45 p.m. ET.
So what
At first blush, the price drop seems strange. Jabil reported 12% year-over-year earnings growth, landing at $1.88 per share, and revenues rose 7% to $8.13 billion. Both headline figures edged out Wall Street's consensus expectations. Guidance for the next quarter and full year was also above the current Street projections.
Shouldn't that be enough to drive Jabil's stock higher today? As it turns out, investors may have expected more than in-line guidance and modest growth this time. Electronics manufacturers have posted robust stock returns over the last year while the broader market struggled, and Jabil approached this report with a sector-leading one-year gain of 53%.
Against that backdrop, you need a home-run kind of quarter in order to support the surging stock price. So instead, today's price action results from Jabil merely delivered a solid base hit (a five-yard pass at midfield, a simple offside trap, or a good free throw instead of a flashy dunk, in case you're not into baseball).
Now what
Here's the interesting part: Jabil's shares look cheap even after the bull run they experienced in recent months:
JBL Normalized PE Ratio data by YCharts.
And the business is enjoying an extended period of high demand, as electronic systems and components are making their way into lots of traditionally mechanical devices.
"We continue to expect areas of our businesses benefiting from strong long-term secular growth trends like electric vehicles, healthcare, renewable energy infrastructure, 5G, and cloud to drive solid year-over-year growth," CFO Mike Dastoor said on the earnings call.
While investors may need to be patient as the company's growth may not be a home run, Jabil's solid base hit in this earnings report suggests that it has a strong foundation for future success. That's still an impressive play in this shaky economy, and Jabil looks like a solid value investment today.
