Electronics for Your Portfolio

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Jabil Circuit (NYSE: JBL) reported fiscal first-quarter earnings of $106 million, or 51 cents per share, on revenue of $4.6 billion, on December 19. Being an electronic products solutions company providing comprehensive electronics design and product management services to electronics and technology companies worldwide; Jabil helps bring electronics products to the market faster and more cost effectively.

Measurable Aspects

Earnings of the Company were down by 6.3 % from a year ago, while revenue rose by 7 percent. However, shares prices were up by 8.5% after Q1 results were reported.

The Chief Financial Officer of Jabil Circuit, Forbes Alexander, was pleased to announce that the company has generated cash flow from operations of $152 million during the quarter. Further as a result of their outstanding performance and the ongoing strength of the company’s balance sheet, they were able to return $148 million in capital to shareholders during the first quarter of fiscal year 2013 by way of dividends and share repurchases.

Jabil’s Diversified Manufacturing Services business grew by 20 percent in the first quarter when compared to results of the first quarter of fiscal year 2012. The company’s Enterprise & Infrastructure business increased by 17 percent from the first quarter of fiscal year 2012, whereas Jabil’s High Velocity business declined by 20 percent. Moreover the company has generated cash flow from operations of $152 million during the quarter.

Looking Forward

The Chief Financial Officer of the Company is confident of the Company continuing the outstanding performance of this quarter in the future and estimates operating cash flow of $1 billion by the end of fiscal 2013.

Moreover, due to seasonal patterns of demand, CEO Timothy Main believes that expectations for the second fiscal quarter of 2013 will be consistent. Although environmental conditions shall continue to be uncertain, he expects that fiscal 2013 will turn out to be another record year for Jabil.

Management has also provided a guidance range for Net Revenue, Core Operating Income and Core Earnings per share being, $4.3 billion to $4.5 billion, $165 million to $185 million and $0.50 to $0.58 per diluted share, respectively.

Areas to be considered

The company has the following two major competitors.

Sanmina Corporation (NASDAQ: SANM) provides integrated electronics manufacturing services worldwide. The Gross margin snapshot of the Company for the fourth quarter was 7.4% and operating margin was 3.5%, both being 60 basis points higher and 70 basis points higher than the third quarter, respectively. Overall, the fourth quarter was solid from a margin standpoint and very strong from a cash generation perspective.

Headquartered in Singapore, Flextronics (NASDAQ: FLEX) is a leading Electronics Manufacturing Services (EMS) provider. The Company has announced that it will hold its quarterly conference call to discuss third quarter results on January 24, 2013 and that they have entered into an agreement with Motorola Mobility to acquire the latter’s manufacturing facility and equipment in China and related equipment in Brazil. The cost of this acquisition is still undisclosed by Flextronic. Furthermore, the company has improved earnings per share by 33.3% in the most recent quarter ending September 28, compared to the same quarter a year ago.

Takeaway Advice

The company’s results have been negatively impacted by higher operating expenses and weak performance from two of its main customers, Research In Motion and Cisco Systems. Moreover, a sluggish macro environment has also hurt Jabil’s growth.

Although the current scenario is not expected to change much in the near future, Jabil’s increasing exposure to Apple as its new customer, better-than-expected first quarter 2013 results from Cisco and the upcoming new product release (Blackberry 10) from RIMM, give enough indications that the company shall go quite forward. 

Thus, I would remain Neutral and would recommend holding the Company’s stock over the short term (6-12 months).

garimaarora has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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