Build A Better Tech Portfolio With Jabil Inc.
September 27, 2022 at 10:00 AM EDT
In this light, Jabil, Inc’s business is supported by the same global demand that is helping to underpin inflation and is even more insulated from tech-specific market worries than other blue-chip tech names. The takeaway here is that Jabil, Inc just reported a top and bottom line beat and increased its capital return program at a time when other tech companies are cutting staff and trimming budgets.
Jabil, Inc Increases Capital Return On Record Revenue
Jabil, Inc had a fantastic quarter with revenue of $9 billion not only setting a company record but growing by 21.6% versus last year, an acceleration in YOY growth, and beating the Marketbeat.com consensus estimate by $0.600. The $0.60 billion in strength is worth 700 basis points in additional growth and comes with an expectation for another record quarter in FQ1. Growth was underpinned by both segments but the Electronics Manufacturing Services segment led with a growth of 32% over last year compared to only 13% growth for the Diversified Manufacturing Services.
Jabil also demonstrated earnings power in the Q4 report with the gross and operating margins expanding. The gross margin expanded by a slim 15 basis points but expanded it did and that gain was coupled with a decrease in SG&A expense that more than offset an increase in other operating expenses. The operating margin improved by a wider 60 basis points to drive strength in both the GAAP and adjusted EPS, too. On the bottom line, the GAAP $2.25 is nearly double last year’s take while the adjusted $2.34 is up 62.5% YOY and beat by a full $0.20 or 935 basis points and guidance is strong as well.
Turning to the guidance, the company is expecting FQ1 revenue in the range of $9.0 to $9.6 billion compared to the consensus estimate of $9.0 billion and there is room for strength in the EPS outlook as well. The EPS range of $2.00 to $2.40 brackets the $2.22 consensus estimate neatly with the possibility of upside surprises as well. The takeaway is that cash flow is good and FCF too and both are sustaining a healthy capital return program.
Jabil Announces Buybacks Up To $1.0 Billion
Jabil is not a dividend grower or even a large payment but it is an incredibly steady distribution, a very healthy payment, and one that could easily be increased by a substantial amount at any time. The company is paying about 0.57% in yield but that yield comes with a 4% payout ratio and a very solid balance sheet. The company is so confident in its position and guidance that it announced a $1 billion buyback plan with the Q4 results. The $1 billion will be used through the 2024 time frame and is worth nearly 13% of the prerelease market cap.
The Technical Outlook: Jabil Is Undervalued And Ready To Move Higher
Jabil, Inc is a deep value compared to other blue-chip tech stocks like Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT), and Apple (NASDAQ: AAPL) which are all fundamental to today’s tech-enabled world. Trading at 7X its earnings it is even a value compared to stocks like Juniper Networks (NASDAQ: JNPR), Cisco (NASDAQ: CSCO), and Oracle (NYSE: ORCL) as well, and Jabil, Inc is moving higher in the wake of its report. The stock gained at least 5% in the premarket session confirming support above the $55 level and giving an indication of a bottom that could keep the stock range bound if not send it into reversal. The price action has traced out a Head & Shoulders pattern that suggests the pullback in prices is over but a full reversal is not yet indicated. The next big hurdle is resistance near the $65 level, if the market can get above that a move up to a new high is likely. If not this stock could move sideways over the next quarter or so.