Jabil (JBL +1.48%) stock tumbled 12.5% through 10:20 a.m. ET Friday morning after the stock reported mixed earnings and gave weak guidance in its fiscal Q2 2024 financial report.
Heading into the earnings report, analysts had forecast that Jabil would earn $1.66 per share on $6.9 billion in quarterly sales. Jabil beat the earnings number with a "core" profit of $1.68, but missed on sales, reporting $6.8 billion.
NYSE: JBL
Key Data Points
Jabil Q2 earnings
At the same time, Jabil reported much stronger earnings as calculated according to generally accepted accounting principles (GAAP) than its "core" results suggest. Total earnings for the quarter came to $1.1 billion -- $7.31 per share. The problem with this is that the bulk of Jabil's profits came from the sale of its mobility division, which accounted for $944 million of the company's profits. It's after backing that profit out that Jabil arrived at its core profit -- $1.68 per share.
The contract electronics manufacturer expects future profits to better resemble the core results just reported. Management guided for $6.2 billion to $6.8 billion in fiscal Q3 revenue and $1.65 to $2.05 in adjusted profits per share. (GAAP profits will range from $0.82 to $1.38 per share.)
Is Jabil stock a sell?
For the full year, Jabil forecasts $28.5 billion in revenue and $8.40 per share in core profits -- implying investors should value the company on this number rather than whatever GAAP earnings it reports. So let's do that.
At $18.8 billion market capitalization and a $128 share price, $8.40 per share in core income implies a current-year valuation of 15.2 times earnings. That seems expensive, given most analysts forecast Jabil's core earnings will grow only 12% annually over the next five years.
I wouldn't say it's so expensive as to make the stock a "sell" at its current price. But I will say that today's valuation looks a lot more appropriate than when Jabil was trading closer to $150 earlier this week. The sell-off is justified.
