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Jabil (JBL) Q4 Earnings, Sales Top, Restructuring Begins

Zacks

Jabil Circuit Inc. JBL reported stronger-than-expected fourth-quarter fiscal 2016 results. Adjusted earnings (including share-based compensation but excluding all one-items) of 28 cents per share surpassed the Zacks Consensus Estimate of 16 cents.

Quarter Details

Revenues of $4.43 billion also beat the Zacks Consensus Estimate of $4.38 billion but were lower than the prior-year quarter’s figure of $4.68 billion.

Electronics Manufacturing services revenues (63% of revenues) came in at about $2.8 billion, up 1% year over year. Diversified Manufacturing Services revenues (37% of revenues) decreased 14% year over year to $1.6 billion.


Operating Details

Gross margin contracted 75 basis points (bps) on a year-over-year basis to 7.3%.

Operating expenses as a percentage of revenues increased 36 bps year over year to 5.2%. Selling, general and administrative expenses (as a percentage of revenues) increased 23 bps to 4.7% on a year-over-year basis.

The company’s core operating income decreased to $108.3 million from $162.9 million in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the quarter, cash and cash equivalents were $912.1 million, compared with $913.9 million as on Aug 31, 2015.

Cash flow from operations for fiscal 2016 was $916.2 million compared with $1.24 billion in the prior fiscal.

Restructuring Program

Apart from the quarterly results, the company declared its plans to realign its global capacity and administrative support infrastructure so as to optimize organizational effectiveness amid a sluggish macroeconomic scenario. Jabil projects the cost of restructuring to be approximately $195 million spread over a period of two years. Of the total expenses, about $120 million to $150 million will be incurred in fiscal 2017 and the rest in fiscal 2018. The company projects an impact of approximately $50 million on its cash and cash equivalents for two years. In fiscal 2017, its cash and cash equivalents will witness a negative impact of $25 million.

Guidance

The company initiated guidance for the first quarter of fiscal 2017.

For the first quarter, Jabil expects total company net revenue to decrease 6% year over year to the range $4.8 billion to $5 billion while core operating income is estimated in the range of $175 million to $225 million.

On a year-over-year basis, revenues from Diversified Manufacturing are expected to decrease 12% given softness in the mobility business. Electronics Manufacturing Services revenues are expected to be flat on a year-over-year basis.

The company expects GAAP earnings in a range of 5 cents to 36 cents per share, including 4 cents for amortization of intangibles, 13 cents of stock-based compensation expense and 21 cents – 32 cents as restructuring charges.

Currently, Jabil Circuit has a Zacks Rank #3 (Hold). Better-ranked stocks in the tech space include Facebook Inc FB, NetEase, Inc. NTES and NetApp, Inc. NTAP. All these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

JABIL CIRCUIT Price and Consensus

JABIL CIRCUIT Price and Consensus | JABIL CIRCUIT Quote

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