Jabil Inc.

Jabil’s Q1 performance was impressive and the company delivered an all-around beat which helped propel its stock price. The company’s strength resulted in the quarter’s double-digit rise in revenue, core operating income, and core diluted profits per share. Its Q1 success again reflected its varied portfolio and ongoing involvement in end sectors with long-term secular trends. Jabil’s management continues to anticipate some consumer-focused end markets to perform poorly year over year. Automotive revenue growth is anticipated to exceed 40% year over year. Also, there is expected to be double-digit year-over-year growth for its healthcare business. This sector also continues to profit from the trend of manufacturing outsourcing. It has also historically weathered economic downturns due to its extended product life cycles, accretive margins, and steady cash flows. Furthermore, infrastructure development is speeding up which should benefit the company. Regardless of the short-term economic situation, the management anticipates these rollouts to take place over the coming years. To sum up, despite an anticipated economic slowdown in the second half of the fiscal year, Jabil’s business outlook is positive, and the strong demand may continue across many of their end markets. We remain neutral about its performance and maintain our ‘Hold’ rating.