We already knew that businesses are buying more chips than they used to, and that consumers have started buying the end-product gadgets again. So it only makes sense to see stronger business in between those steps, too.
Jabil Circuit (NYSE:JBL) makes circuit boards, onto which builders like Cisco (NASDAQ:CSCO), Nokia (NYSE:NOK), and Hewlett-Packard (NYSE:HPQ) mount components to create their routers, handsets, computers, and other electronics. And Jabil CEO Tim Main says that demand for Jabil's products and services is picking up again.
"Based upon our current expectations, it appears as though the worst of the recession is behind us," he said in Jabil's fourth-quarter report. The company saw a small net profit again after three quarters of red ink, all thanks to cost-cutting, a stronger market share, and "a more benign end-market environment."
Year-over-year, this quarter was far from impressive. Sales dwindled from $3.3 billion in 2008 to $2.8 billion this time around. Earnings fell from $0.28 per share to $0.03 per share -- nearly a 90% shrinkage.
But the fourth quarter was still way better than the rest of Jabil's year. The company lost $1.2 billion in fiscal 2009 but finished up with a $5.5 million fourth-quarter profit. Fiscal discipline turned red ink into black despite a severe loss of sales, and if Jabil can keep that newfound discipline when revenue returns to normal levels … well, you know what they say: What doesn't kill you makes you stronger.
Wall Street has shown the patience of an angel with Jabil's troubles, as the stock has soared almost 40% over the last year, even as the S&P 500 lost about 10%. Other circuit board specialists have beaten the broader market, too, including 800-pound gorilla Flextronics (NASDAQ:FLEX) and quick-turn expert TTM Technologies (NASDAQ:TTMI). And don't forget about Jabil's 2.3% dividend yield.
I still think that chip designers like Texas Instruments (NYSE:TXN) could be the best way to profit from the resurgent tech sector, but Jabil is making a strong argument for itself. How would you ride this wave? Let us know in the comments below.
