Business Accelerates At Jabil
Technology is one of the two biggest stories of the pandemic. The other is consumer spending and Jabil Circuit (NYSE:JBL) is benefiting from both. The pandemic made the world lean heavily on technology, proving its worth to society and accelerating the shift to digital. The pandemic also altered consumer habits and those include digital. Not only in the form of eCommerce but in our need for other types of devices, connected or otherwise, that enable socially-distanced work and play.
Results from company’s like Garmin (NASDAQ:GRMN) and Johnson Outdoors (NASDAQ:JOUT) show that there is not only a robust increase in sales through digital channels but also of those lifestyle-enhancing digital devices. And that means business for Jabil, supplier to the world’s technological powerhouses.
“I’m thrilled with the strong start to the fiscal year,” said CEO Mark Mondello. “Our unique positioning as a critical and trusted supplier for so many of the world’s leading brands is allowing us to benefit from powerful end-market trends. As a result, our team delivered record quarterly results for revenue, core operating income and core EPS. Importantly, these impressive results show that our multi-year strategy to create a more optimized commercial portfolio is working,”
Jabil Smokes The Consensus With Record Revenue
Jabil not only reported a strong quarter but one that outpaced the consensus by double-digits and set a company record. The $7.83 billion in consolidated revenue is 4.3% higher than this same time last year and an acceleration from the previous quarter. In terms of the analysts, the revenue beat by 1100 basis points firmly pointing to strength within the entire tech sector.
Let me remind you, it was just a week or so ago that word came out Apple's (NASDAQ:AAPL) Q1 production was going to be 30% higher than last year and Apple is a customer of Jabil. On a segment basis, there was some weakness in the Electronics Manufacturing segment, it is down -4% for the quarter, but that was offset by a 13% gain for the Diversified segment.
Moving down the report, operating income roughly doubled on a YOY basis to deliver solid gains on the bottom line. On a GAAP basis, earnings rose to $1.31 versus last year’s $0.26 while adjusted earnings came in at $1.60. The GAAP earnings beat the consensus estimate by $0.26 while adjusted beat by $0.34.
The company’s business is steady enough for management to issue an update to guidance. The company is expecting both revenue and adjusted EPS to bracket the consensus with the consensus near the bottom of the range.
Jabil’s Dividend Is Among The Safest On Wall Street
Jabil’s dividend doesn’t have much going for it other than utter reliability. The stock is yielding only 0.75% with shares near $44 but there is absolutely no reason to think it will be cut or suspended. The payout ratio, for one, is less than 7.0% of F2021 earnings and that is backed up by the balance sheet. The company is carrying a modest amount of debt but that is offset by a large cash position and improving free cash flow. After ten years of stable payouts, I wouldn’t hold my breath waiting for a distribution increase, but I also wouldn’t worry about them not paying it.
The Technical Outlook: Jabil Breaks Out
Shares of Jabil surged more than 8% after the open to break above the pre-COVID high and set a new 20-year high. The move is driven by strong results, better-than-expected guidance, and 3X average daily volume that could send it even higher in the coming days and weeks. The indicators are bullish and in the support of the move as well. The risk for investors now is that price action will close the gap and/or seek firm support before moving higher.
