Now It’s Time To Buy Jabil, But Cautiously
Jabil (NYSE : JBL) has been a top pick for the post-pandemic world and it still is. Although the stock has been trapped in a trading range over the last 9 months, the bias in the outlook is decidedly upward and there is a new catalyst to drive the action. The institutions, who’d been, on balance, rotating into and out of the stock over the preceding 3 quarters, are now buyers. Institutional activity not only ramped higher in Q2 but the balance of activity is more than 5:1 in favor of the bulls and worth more than 6% of the market cap with the shares trading near their current level of $58.80.This activity confirms the floor in price action and has the stock set up to move higher now that the Q3 results are in the bag.
Jabil Beats And Raises Guidance In Q3 2022
One reason Jabil has been trapped in a trading range is the fear of slowing growth and that fear was misplaced. The company reported $8.3 billion in consolidated earnings driven by strength in both operating segments, Diversified Manufacturing Solutions, and Electronic Manufacturing Solutions. The revenue is up 15.3% versus last year and 35% in the two-year stack which beats the consensus estimate by 97 basis points. The revenue beat is a slim one, we know, but it also comes with better than expected margin and an increase to FY guidance. DMS grew by 7% at the segment level while EMS grew by a stronger 23%.
Moving down to the margin, the margin news is mixed but ultimately better than expected. The gross margin contracted by 110 basis points but was offset by a reduction in operating costs. On the operating end, SG&A, R&D, and amortization fell on a YOY basis to drive a 55 basis point increase. This left the GAAP earnings at $1.52 or up $0.40 from last year while the adjusted EPS of $1.72 beat grew by $0.40 YOY and beat the consensus by $0.10. And for the guidance, the company is expecting to see strength carry into the current quarter but there is some risk. The guidance was raised for the FY but the specific Q4 guidance is a bit tepid. The company is expecting revenue in a wide range of $8.1 to $8.7 billion versus the $8.38 billion consensus figure which leaves plenty of room for disappointment.
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The Analysts See Upside In Jabil, Inc
We’ve not seen any analyst's commentary since the Q3 release but we know it's on the way. The results are contrary to the recent trend in sentiment which has the consensus price target edging lower in the 30-day comparison. That said, the current consensus is a strong Buy verging on Outperform with a price target of $76.80. That target is worth about 30% of upside for shareholders and we think it could move higher over the summer. The latest nod comes from Goldman Sachs which rates the stock a Buy but lowered its target to $69.
The Technical Outlook: Jabil, Inc Is Near Bottom
Price action in Jabil, Inc has been mixed in the wake of the report but nothing suggests a major downdraft is brewing. If anything, price action may retreat to the $56 level where institutional support is strongest. If that level fails to hold prices up there is a chance of a deeper correction but we don’t think it’s coming, not yet anyway. Assuming support is able to hold the stock above $56, we see it ranging sideways for the next few quarters until there is a shift in the broader economic outlook.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Jabil (JBL) | $130.40 | +1.7% | 0.25% | 11.83 | Moderate Buy | $143.50 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
