Hot stock to watch: Jabil Inc (NYSE: JBL)

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Jabil Inc (NYSE: JBL) stock rose over 0.9% in the pre-market session on March 15th, 2019 (Source: Google finance) though the company posted better than expected earnings for the second quarter of FY 19.

During the quarter, the company experienced robust revenue in the EMS segment. This strength was driven by our cloud, retail and industrial sectors. Within the DMS segment, the results were terrific. Core operating margin came in at 4.5%, a 110 basis point improvement year-on-year. Further, healthcare and 5G wireless wins are both up $50 million since September. A 15% increase. The wins in the cloud space are now up 30% to 40% since the beginning of the fiscal year. And the automotive business wins remain on plan. Free cash flow for the quarter was $28 million. Core return on invested capital for Q2 was 16.5%. JBL exited the quarter with total debt to core EBITDA levels of approximately 2.3 times and cash balances of $749 million.

JBL in the second quarter of FY 19 has reported the adjusted earnings per share of 64 cents, beating the analysts’ estimates for the adjusted earnings per share of 61 cents. The company had reported the adjusted revenue growth of 14 percent to $6.1 billion in the second quarter of FY 19, which is as per the analysts’ estimates for revenue of $6.1 billion. Core operating income during the quarter was $191 million an increase of 7% year-over-year representing a core operating margin of 3.1%. Net interest expense during the quarter was $55 million, $5 million above previous expectations on higher levels of intra-quarter borrowing, driven mainly by two factors. First, the timing and scale of the ongoing new business ramps. And second, during the quarter, the company continued to opportunistically repurchase the shares. The core tax rate for the quarter was 27%.

Moreover, revenue for the DMS segment was $2.3 billion, down 7% year-over-year. This was mainly due to weaker than expected mobility demand. Revenue for the EMS segment increased by 33% year-over-year to $3.8 billion. Core margins for the segment declined 100 basis points year-over-year to 2.3%, due to continued softness in the semi-cap space and costs associated with the ramping new business awards.

For the second quarter, the company had expected net revenue in the range of $5.8 billion to $6.4 billion and earnings in the range of $0.20 to $0.48 per share. Core (non-GAAP) earnings were anticipated to be in the range of $0.51 to $0.71 per share. DMS revenue was predicted to rise 6% and EMS revenue was expected to grow by 23% from the previous year.

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