Investopedia: Can Jabil Take The Next Step?

There is a certain cyclical rhythm in the electronics manufacturing services (EMS) space. Orders are cut in the bad times and clients will in-source manufacturing to boost their own utilization rates. Then, as things get better, the cycle reverses and EMS companies once again see more business. As this process unfolds, revenue rises, margins improve and estimates move higher. Last and not least, even the EMS companies come up against capacity constraints, the industry peaks, and the whole cycle starts anew. 

Every cyclical industry has periods where the stocks tend to outperform, and investors can do well if they time their buys and sells appropriately. Turning to Jabil Circuit (NYSE:JBL), then, the question is whether there is still reason to hope for improvement and more momentum in the story.

A Fine Second Quarter 

Although there have been some growth concerns around major Jabil clients like Cisco (Nasdaq:CSCO) and Research In Motion (Nasdaq:RIMM), Jabil nevertheless produced a respectable quarter. Revenue grew 31% from last year and surpassed the average analyst estimate.

Below the top line, Jabil delivered some of the results that an investor would expect in that more favorable back half of the EMS cycle. Gross margin was only slightly better than in the year-ago period, but the company wrung very solid leverage out of its SG&A spending, which fueled growth in adjusted operating income of 76% (or 69% in GAAP operating income).  

To read the full piece, please go to:
http://stocks.investopedia.com/stock-analysis/2011/Can-Jabil-Take-The-Next-Step-JBL-CSCO-RIMM-BSX-JNJ-FLEX-CLS0324.aspx