On Friday, BofA Securities maintained its Buy rating and $135.00 price target for Jabil (NYSE:JBL) shares, a leading provider of digital manufacturing services. The firm anticipates that the upcoming fiscal fourth quarter 2024 report and annual investor briefing, scheduled for Thursday, September 26, 2024, will draw significant attention to the company's financial guidance for fiscal year 2025.
The analyst at BofA Securities pointed out that due to a weaker macroeconomic environment in the near term and adjustments in Jabil's business, including the divestiture of its Mobility business and a strategic move away from $800 million in less profitable legacy programs, the company is expected to start fiscal year 2025 with a revenue base $2.5 billion lower than in fiscal year 2024.
Consequently, Jabil's revenue guidance for fiscal year 2025 is projected to be between $27.0 billion and $27.5 billion, with earnings per share (EPS) forecasted to be in the range of $8.50 to $9.00.
Despite these challenges, the firm is optimistic about Jabil's long-term growth, driven by sectors such as electric vehicles, energy storage, cloud services, renewables, and digital health. The analyst believes that the recovery of end markets, particularly semiconductor capital equipment, could lead to better-than-expected financial performance, potentially resulting in earnings above $9.00.
Jabil's stock performance has seen a 13% decline year-to-date, and market options signal a possible 7% one-day move following the earnings report. BofA Securities suggests that any potential decrease in stock price post-earnings could present a buying opportunity, citing Jabil's large scale, potential for capital returns, improving margins, and robust cash flow as key factors supporting the Buy rating.
In other recent news, manufacturing services provider, Jabil, announced the appointment of its CEO, Michael Dastoor, to the company's Board of Directors. This follows the company's strong Q3 FY '24 results, with revenues reaching approximately $6.8 billion, primarily driven by the connected devices and networking and storage end markets.
However, Jabil withdrew their FY '25 guidance due to market softness, particularly in EVs and semi-cap equipment, and an anticipated reshaping of their portfolio, which may reduce revenue by $800 million.
In addition to these developments, Jabil plans to complete a $2.5 billion share repurchase in Q4 and reduce WASO to 110-113 by the end of FY '25. The company also forecasts Q4 revenue between $6.3 billion and $6.9 billion, aiming for a full-year revenue of $28.5 billion.
Jabil's core operating income stood at $350 million, indicating a year-over-year improvement. Nevertheless, the company expects an $800 million revenue headwind in FY '25 due to portfolio reshaping and customer deselection. These are recent developments for Jabil.
InvestingPro Insights
As Jabil (NYSE:JBL) approaches its fiscal fourth quarter 2024 report, InvestingPro data highlights a market capitalization of $12.66 billion and a P/E ratio of 9.94, indicating a potentially undervalued stock relative to near-term earnings growth. The company's revenue for the last twelve months as of Q3 2024 stands at $30.38 billion, despite a decline of 13.88% during the same period. This aligns with BofA Securities' observations of a challenging macroeconomic environment impacting Jabil's financials.
InvestingPro Tips suggest that Jabil's management has been actively buying back shares and the company boasts a high shareholder yield, which could be attractive to investors seeking companies with proactive capital distribution strategies. Moreover, Jabil has been trading at a low revenue valuation multiple, which, when coupled with the company's long history of maintaining dividend payments—19 consecutive years—could provide a compelling case for long-term investment despite short-term headwinds.
For investors seeking more in-depth analysis, there are over 10 additional InvestingPro Tips available, including insights on Jabil's gross profit margins, debt levels, and profitability forecasts for the year. These tips can offer valuable perspectives for those considering Jabil's stock in light of the upcoming earnings report and investor briefing.
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