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Will Jabil Circuit (JBL) Q4 Earnings Pull Off a Surprise?


Jabil Circuit Inc. JBL is set to release fourth-quarter fiscal 2016 results on Sep 21, after the closing bell. Last quarter, the company delivered a positive earnings surprise of 100%. Jabil Circuit has delivered an average positive earnings surprise of 32.12% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

Factors to Consider

Jabil Circuit is likely to benefit from the opportunities in the healthcare and packaging business, which are expected to drive its Diversified Manufacturing (DMS) revenues. The company has also been seeing strength in demand from telecommunications customers, which should boost its Electronics Manufacturing Services (EMS) sales. In addition, the company is expected to benefit from its largest customer Apple AAPL, which recently launched iPhone 7. We expect Jabil’s sales in the to-be-reported quarter to benefit from the demand for components for the latest device. This apart, the company has been seeing strength in non-traditional sectors, which should prove to be important growth drivers.

However, stagnating sales amid intensifying competition and macroeconomic headwinds remain concerns.

Last quarter, Jabil lowered its sales outlook for fiscal 2016 to $18.2 billion from $18.5 million projected earlier. Non-GAAP earnings projection was also lowered to $1.85 per share from $2.12 projected earlier.

For the fourth quarter, Jabil expects total company net revenue to decline 9% to the range of $4.15 billion to $4.35 billion. The company projects EMS revenues to remain flat in the quarter while DMS revenues were expected to decline. However, robust demand for latest Apple devices will likely offset the decline to some extent.

Earnings Whispers

Our proven model does not conclusively show that Jabil is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Jabil currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 16 cents.

Zacks Rank: Jabil’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

JABIL CIRCUIT Price, Consensus and EPS Surprise

JABIL CIRCUIT Price, Consensus and EPS Surprise | JABIL CIRCUIT Quote

Stock to Consider

The following stocks can be considered at the moment, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

Coca-Cola European Partners Plc CCE with an Earnings ESP of +4.11% and a Zacks Rank #3.

Finish Line Inc. FINL with an Earnings ESP of +1.89% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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