Jabil Circuit (JBL) Q3 Earnings: What's In The Cards?

Jabil Circuit, Inc. (NYSE:JBL) is expected to report third-quarter fiscal 2017 results on Jun 14 after the closing bell. Last quarter, the company delivered stronger-than-expected results with a positive earnings surprise of 11.11%. Jabil Circuit has delivered an average positive earnings surprise of 51.27% in the trailing four quarters.

Let’s see how things are shaping up for this announcement.

Factors to Consider

We believe Jabil Circuit is poised to witness robust progress with its planned efforts to realign global capacity and administrative support infrastructure so as to optimize organizational effectiveness amid a sluggish macroeconomic scenario.

Further, the company’s ongoing realignment program is aiding it to significantly lower expenses while maintaining the production capacities, going forward. Despite the near-time negative impact of about $195 million over the next two years, it will eventually gain considerable benefits from this cost-savings initiative in the long term.

Jabil Circuit’s Electronic Manufacturing Services (EMS) segment (60% of fiscal 2016 revenues) is well positioned to demonstrate strong growth over the next few years. This will primarily be driven by emerging EMS sectors such as industrial, renewable energy, clean tech and medical, aided by escalating technology spending. Meanwhile, opportunities in healthcare and packaging businesses are likely to be growth catalysts for the company’s DMS segment.

For the third quarter, Jabil anticipates total net revenue to increase 2% (at mid point) year-on-year and be in the range of $4.25–$4.55 billion. Core operating income is estimated in the range of $90–$130 million.

On a year-over-year basis, revenues from Diversified Manufacturing Services are expected to increase 9% to $1.6 billion. Electronics Manufacturing Services revenues are anticipated to decrease 1% on a year-over-year basis to $2.8 billion.

On a GAAP basis, the company expects to report loss in a range of 3 cents to 34 cents per share. On the other hand, the company is forecast to post earnings in the range of 19 cents to 39 cents per share on a non GAAP basis.

Earnings Whisper

Our proven model does not conclusively show that Jabil Circuit 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 Circuit currently has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 22 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

ManTech International Corporation (NASDAQ:MANT) with an Earnings ESP of +8.11% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Netflix, Inc. (NASDAQ:NFLX) with an Earnings ESP of +31.25% and a Zacks Rank #3.

Advanced Micro Devices, Inc. (NASDAQ:AMD) with an Earnings ESP of +33.33% and a Zacks Rank #3.

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