Earnings Analysis For Jabil Circuit Inc.

Sep.26.12 | About: Jabil Circuit (JBL)

Jabil Circuit Inc. (JBL) reports preliminary financial results for the year ended 2012-08-31.

Jabil Circuit Inc. recently reported its preliminary financial results based on which CapitalCube provides a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

Jabil Circuit Inc.'s analysis versus peers uses the following peer-set: Flextronics International Ltd. (NASDAQ:FLEX), Pegatron Corp. (4938-TW), Foxconn International Holdings Ltd. (2038-HK), UniMicron Technology Corp. (3037-TW), Hittite Microwave Corp. (NASDAQ:HITT), Celestica Inc. (NYSE:CLS), Tripod Technology Corp. (3044-TW), Plexus Corp. (NASDAQ:PLXS), Benchmark Electronics Inc. (NYSE:BHE) and Sanmina-SCI Corp. (NASDAQ:SANM). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Annual (USD million) 2012-08-31 2011-08-31 2010-08-31 2009-08-31 2008-08-31
Revenues 17,151.9 16,517.3 13,409.3 11,684.5 12,779.7
Revenue Growth % 3.8 23.2 14.8 (8.6) 4.0
Net Income 394.7 381.1 168.8 (1,165.2) 133.9
Net Income Growth % 3.6 125.7 N/A (970.3) 82.8
Net Margin % 2.3 2.3 1.3 (10.0) 1.0
ROE % 19.9 22.1 11.2 (56.1) 5.2
ROA % 5.3 5.7 2.9 (18.9) 2.0
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Valuation Drivers

Jabil Circuit Inc.'s current Price/Book of 2.1 is about median in its peer group. Jabil Circuit Inc.'s operating performance is higher than the median of its chosen peers (ROE of 19.9% compared to the peer median ROE of 13.1%) but the market does not seem to expect higher growth relative to peers (PE of 11.4 compared to peer median of 14.3) but simply to maintain its relatively high rates of return.

The company's median net profit margins of 2.3% and relative asset efficiency (asset turns of 2.3x compared to peer median of 1.7x) give it some operating leverage. Jabil Circuit Inc.'s net margin is similar to last year's high of 2.3%, which compares to a low of -10.0% in 2009.

Economic Moat

Changes in the company's revenues are in-line with its peers (annual revenue changed by 3.8%) but its earnings performance has been better -- its annual earnings changed by 3.6% compared to the peer median of -14.4%, implying that it has better cost control relative to its peers. Jabil Circuit Inc. currently converts every 1% of change in revenue into 0.9% of change in annual reported earnings.

Jabil Circuit Inc.'s current return on assets is around the same as its peer median (5.3% vs. peer median 4.5%). This recent performance contrasts with its less than peer median return on assets over the past five years (-0.6% vs. peer median 2.3%) suggesting that the company's relative operating performance is improving.

The company's gross margin of 9.6% is around peer median suggesting that Jabil Circuit Inc.'s operations do not benefit from any differentiating pricing advantage. In addition, Jabil Circuit Inc.'s pre-tax margin of 3.0% is also around the peer median suggesting no operating cost advantage relative to peers.

Growth & Investment Strategy

While Jabil Circuit Inc.'s revenues have grown faster than the peer median (13.6% vs. 5.3% respectively for the past three years), the market gives the stock an about peer median PE ratio of 11.4. This suggests that the market has some questions about the company's long-term strategy.

Jabil Circuit Inc.'s annualized rate of change in capital of 12.3% over the past three years is higher than its peer median of 3.8%. This investment has generated an above peer median return on capital of 10.3% averaged over the same three years. Evidently, the relatively high capital investment was successful given the relatively strong growth in its returns.

Earnings Quality

Jabil Circuit Inc.'s reported net income margin for the last twelve months is around the peer median (2.3% vs. peer median of 2.3%). However, the company has also recorded a relatively low level of accruals (1.4% vs. peer median of 2.2%) which suggests possible overstatement of its reported net income.

Jabil Circuit Inc.'s accruals over the last twelve months are around zero. However, this modestly positive level is also less than the peer median which suggests some amount of building of reserves.

Trend Charts

Company Profile

Jabil Circuit, Inc. provides worldwide electronic manufacturing services and solutions. The company provides electronics design, production, product management and repair services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries. It operates its business through three segments: Diversified Manufacturing Services, Enterprise & Infrastructure and High Velocity Systems. Jabil Circuit was founded by William E. Morean and James Golden in 1966 and is headquartered in St. Petersburg, FL.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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