Jabil Circuit Earnings: Will Apple Gains Cushion the BlackBerry Blow?

Jabil Circuit (JBL -1.46%) will release its quarterly report on Tuesday, and investors continue to remain gloomy about the electronic-component maker's future prospects. Jabil has historically been a major supplier for BlackBerry (BB -3.14%), and with the once-dominant mobile-device maker having fallen on hard times, Jabil needs to figure out a way to use its relationships with Apple (AAPL 0.52%) and other customers to make up for the challenges that BlackBerry's decline has created for the manufacturing company.

Jabil is just one of many little-known companies that stand behind popular consumer-electronics products like smartphones. Jabil's business model involves working with major brand names to help them ramp up production of their most popular devices, and as demand for those devices has increased, the opportunities for Jabil and its competitors to reap profits has increased. But with the ongoing ebb and flow of various device-makers, can Jabil navigate the industry's waters to find eventual growth? Let's take an early look at what's been happening with Jabil Circuit over the past quarter and what we're likely to see in its report.

Stats on Jabil Circuit

Source: Yahoo! Finance.

What's next for Jabil earnings this quarter?
Analysts have gotten much more concerned about Jabil earnings in recent months, cutting their November-quarter estimates by a dime per share and reducing their full-year fiscal 2014 projections by 13%. The stock has continued sliding, falling 19% since mid-September.

Jabil didn't come into the current quarter on a strong note, announcing August-quarter results and guidance that were troubling for investors. Even though the contract-electronics manufacturer managed to beat earnings expectations, Jabil warned that it wouldn't meet its fiscal-2014 earnings target because it was looking for ways to wind down its relationship with BlackBerry, which is Jabil's second-largest customer and represents about 12% of its overall revenue. A guidance cut of more than 10% led to about the same percentage drop in the stock on the day of the announcement.

As a result, Apple assumes an even greater importance in Jabil's future now, as it represents Jabil's biggest customer at 19% of revenue. Apple stock didn't perform terribly well after the release of the iPhone 5, for which Jabil provided aluminum casings. But the iPhone 5s and 5c launches have made investors more enthusiastic about Apple's prospects, and Jabil stands to reap the benefits of that success. Moreover, Jabil's acquisition of Nypro, which makes custom plastics, could help Apple if it continues to look at using more polycarbonate materials in its products, as its 5c uses.

Still, it's important to look at Jabil's other business segments. In addition to its consumer-products manufacturing, Jabil still gets about 30% of its overall revenue from its enterprise and infrastructure division, which gives the company important diversification away from relying solely on consumer electronics. In particular, the E&I segment focuses on telecommunications, storage, and networking industries, and it has ridden the success of development of wireless networks and other innovations that have ridden the coattails of the smartphone revolution.

In the Jabil earnings report, watch to see whether the company details a plan expounding on its pullback from BlackBerry. If it can convince investors that the worst is over, Jabil stock is in position to rebound fiercely and give shareholders respite from the losses they've suffered lately.

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