Jabil Circuit, Inc. (NYSE:JBL) and JBL stock didn’t excite investors with great top- and bottom-line fourth-quarter financial results Wednesday, but this Apple Inc. (NASDAQ:AAPL) parts supplier has tons of room to grow.
With JBL stock falling more than 6% in Wednesday’s after-hour session, despite a beat on both revenue and profits, Jabil Circuit looks like a solid bounce-back candidate for the next three months. And investors only need to look at Apple and the early success of its just-launched iPhone 7.
True, Jabil Circuit posted fourth-quarter revenue of $4.43 billion, which declined 5.3% year-over-year. Jabil still, however, pocketed 28 cents per share in earnings during the quarter, topping Wall Street’s estimates for 25 cents per share. Not to mention, despite the revenue decline, JBL still exceeded consensus of $4.27 billion.
The Advantage of Jabil Circuit Stock
And here’s the thing: The company forecasts fiscal 2017 first-quarter earnings in the range of 54 cents to 74 cents per share, which at the mid-point, exceeds consensus estimates of 62 cents per share. Meanwhile, Jabil Circuit projects first-quarter revenue will be between $4.8 billion and $5 billion, while Wall Street is looking for $4.88 billion in revenue.
Jabil’s first-quarter revenue forecast is what investors should pay attention to. Why? Jabil makes iPhone casings for Apple, and AAPL has begun to ramp up its iPhone orders on the heels of Samsung’s exploding batteries. Apple has shipped, on average, 30 million iPhone 6s units per month in the second half of 2015. Although AAPL originally planned to ship only 60% of that number for iPhone 7’s, Apple has since boosted that shipment total by 10% to 15%.
Why is AAPL so confident? As a safety precaution over exploding phones, Samsung has pulled its Galaxy Note 7 device from ten countries, including in the U.S. and South Korea. Plus, retailers like Target Corporation (NYSE:TGT) and Best Buy Co Inc (NYSE:BBY) has reportedly stopped selling the phone. Add the fact that Amazon.com, Inc. (NASDAQ:AMZN) has reportedly removed availability of the Note 7, it’s possible that Apple and the iPhone 7 will have a great holiday season.
All of this bodes well for Jabil Circuit and JBL stock because it will mean more component orders from Apple, which is Jabil Circuit’s largest customer. In other words, even as Jabil might have underwhelmed with its first-quarter guidance, the stars are aligning for a strong beat. And with JBL stock under pressure Thursday because investors have failed to connect these dots, now’s the time to bite.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
