Jabil (JBL, Financial) saw a significant boost today, with shares rising 10%. The electronic circuit board maker exceeded top and bottom-line estimates for the second consecutive quarter in Q4 (Aug), issued positive FY25 guidance, and authorized up to $1.0 billion for buybacks, roughly 7% of its outstanding shares. Additionally, JBL approved a restructuring plan, including headcount reductions, and announced a transition to three new reporting segments in FY25: Regulated Industries, Intelligent Infrastructure, and Connected Living & Digital Commerce. This follows the divestiture of its mobility business for $2.2 billion earlier this year.
Quarterly numbers were decent:
- EPS of $2.30 marked a 6.1% drop year-over-year, primarily due to a 17.7% decline in revenues to $6.96 billion. Despite four consecutive quarters of double-digit percentage declines in top-line numbers, sales still beat the $6.30-6.90 billion forecast.
- By segment, DMS was down around 22% year-over-year, reflecting the mobility divestiture and some weakness in the automotive business. In EMS, revenues fell 13% year-over-year, but growth in cloud, semi-cap, and warehouse automation markets pushed core margins 90 bps higher to 6.1%.
Guidance was sound:
- JBL's FY25 earnings outlook of $8.65 was slightly higher than consensus, and its revenue forecast of $27.0 billion met analyst targets.
- In the new Intelligent Infrastructure segment, JBL expects 7-10% growth over the long term, a solid target given recent declines.
- JBL predicted a 2% growth rate in health care for FY25, below the overall market growth rate of 3-4%. Management noted that GLP-1 drugs have negatively impacted its medical device segment, a potential concern for companies like Intuitive Surgical (ISRG, Financial) and Stryker (SYK, Financial).
Restructuring plan:
- Following the mobility divestiture, JBL's restructuring plan aims to balance its geographical footprint, with around a third of revenue coming from each of the Americas, Europe, and Asia. Management emphasized that no capacity restructuring will occur, reflecting confidence in a recovery in depressed end markets.
Overall, JBL's Q4 report and subsequent announcements were mostly positive. While headcount reductions highlight some challenges, becoming a leaner organization should strengthen JBL's foundation, positioning it well for an eventual recovery across various end markets.
