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Jabil Circuit Down To Strong Sell On Apple Growth Woes

ByZacks Investment Research
Published 05/15/2016, 09:56 PM
Updated 07/09/2023, 06:31 AM

On May 14, 2016, Zacks Investment Research downgraded Jabil Circuit Inc (NYSE:JBL) to a Zacks Rank #5 (Strong Sell).Going by the Zacks model, companies holding a Zacks Rank #5 are likely to underperform the broader market over the next one to three months.

Apple (NASDAQ:AAPL) , Jabil’s largest customer, has lowered its guidance, thereby raising concerns for the latter.

Why the Downgrade?

Jabil, which is one of the largest global suppliers of electronic manufacturing services, derives nearly 20% of its total revenue from Apple while over 30% of the company’s operating income is attributable to the iPhone maker.

Of late, Apple’s growth has been muted because of demand woes related to iPhone and China. Due to this, Apple even declared its plans to reduce channel inventory (primarily iPhone) by $2 billion in the current quarter. This move will directly impact Jabil’s financials, at least in the near term.

Moreover, in the last reported quarter, Jabil missed estimates on both counts. Furthermore, it issued a weak revenue outlook for fiscal 2016. For the current quarter, it expects a revenue decline of 4% year over year.

As a result, over the last 60 days, earnings estimates have been on a downtrend. The Zacks Consensus Estimate declined 22.9% for both fiscal 2016 and 2017 to $1.68 and $1.92 per share, respectively.

Stocks to Consider

A couple of better-ranked stocks in the broader technology sector are Facebook Inc. (NASDAQ:FB) and PetMed Express, Inc. (NASDAQ:PETS) , both sporting a Zacks Rank #1 (Strong Buy).


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PETMED EXPRESS (PETS): Free Stock Analysis Report

APPLE INC (AAPL): Free Stock Analysis Report

JABIL CIRCUIT (JBL): Free Stock Analysis Report

FACEBOOK INC-A (FB): Free Stock Analysis Report

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Zacks Investment Research

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