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Jabil Circuit Downgraded to Strong Sell on Weak 2016 Outlook

Zacks Equity Research
Updated

On Mar 22, 2016, Zacks Investment Research downgraded Jabil Circuit Inc JBL to a Zacks Rank #5 (Strong Sell).

Jabil Circuit, which is one of the largest global suppliers of electronic manufacturing services (“EMS”), has seen downward estimate revisions since it announced second-quarter fiscal 2016 results on Mar 16.

Why the Downgrade?

Jabil reported dismal results for the fiscal second quarter, wherein adjusted earnings (including share-based compensation but excluding all one-time items) of 46 cents per share and revenues of $4.40 billion missed the Zacks Consensus Estimate of 52 cents and $4.54 billion, respectively.

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The company also issued a weak revenue outlook for fiscal 2016. For the fiscal third quarter, Jabil expects total company revenue to decline 4% while core operating income is estimated at $80 million to $100 million. On a year-over-year basis, revenues from Diversified Manufacturing Services (DMS) are expected to decrease 10%, while EMS revenues are expected to remain flat.

For fiscal 2016, management expects revenues of $18.5 million, lower than $20 billion projected earlier and core diluted earnings of about $2.12 per share compared with $2.65 projected earlier.

As a result, over the last 30 days, earnings estimates have been on a downtrend. The Zacks Consensus Estimate declined by 22.9% for both fiscal 2016 and 2017 to $1.68 and $1.92 per share, respectively.

In addition, intensifying competition, macroeconomic headwinds and increasing investments in DMS remain concerns.

Stocks to Consider

Some better-ranked stocks in the technology sector are Etsy, Inc. ETSY, Facebook Inc FB and Stamps.com Inc. STMP. While Etsy sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
STAMPS.COM INC (STMP): Free Stock Analysis Report
 
JABIL CIRCUIT (JBL): Free Stock Analysis Report
 
FACEBOOK INC-A (FB): Free Stock Analysis Report
 
ETSY INC (ETSY): Free Stock Analysis Report
 
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Zacks Investment Research