The bottom is there for Jabil, Inc., but don’t buy it yet

Jabil Appears On Earnings And Outlook, Analysts Are Silent

Jabil, Inc. (NYSE: JBL) benefited from the secular pull and strong demand in all end markets and whose shares rose more than 7.0% following FQ2 results. The problem, for us, is that the price action after the pop is a bit bearish and the analysts haven’t said anything yet. We’re sure they will but there’s always a chance it won’t be what the market wants to hear and that gives us pause. Add to that some institutional selling and we see an opportunity for stock prices to move lower and test strong support before they start moving higher. That said, Jabil is a great company in the industry that we want to own and trade at a discount to a broad market. Assuming price action confirms support when and if it moves lower we think the stock will be buyable, we just want to see some follow through in the market before we commit to it.

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Jabil Has Solid Quarters, Higher Guide

Jabil had a solid quarter with revenue of $7.55 billion, up 10.5% from a year ago and 150 basis points better than Marketbeat.com’s consensus forecast. Revenue was driven by strength in both operating segments with the Electronic Manufacturing segment up 19% and the Diversified Manufacturing Solutions segment up 4.0%. Moving down, the better news is that margins are improving and are better than expected on both gross and operating levels. At its core, the adjusted $1.68 beat the $0.21 consensus and led the company, along with the market outlook, to improve guidance.

Jabil raised its guidance for the coming quarters and 2022 higher. The company is now looking for Q3 revenue in the range with $7.90 billion as the low end compared to the $7.69 analysts expected and there is strength in earnings guidance as well. For the full year, revenue is expected to be at least $32.6 billion compared to the consensus $31.85 and there is considerable room in the range for a larger performance margin.

Analyst Is A Mother But Give Jabil A Buy

Analysts are yet to comment on Jabil’s strong showing and positive guidance but it is only a matter of time before they do. Until then, Marketbeat.com’s consensus rating is Buy companies leaning towards Strong Buy and trending higher over the past year. Consensus price targets are also likely to be higher and 25% above the mid-March 2022 price action. The last five analyst notes, most recently out in December, include two increases and five increases in price targets including activity from Bank of America, Raymond James, Goldman Sachs, and Citigroup.

Technical Prospects: Jabil Appears On Results, Profits Restricted

Jabil shares jumped more than 10% after the earnings report and opened with a large price gap but the action has been bearish since then. Price gains were limited by resistance at $62 and well below our target for strong resistance. Assuming the market continues to decline from this level, we see the stock moving down to the exponential moving average of $58.20 and possibly lower. If support is confirmed at the moving average, an upward move to retest and break the $62 level could cause the stock to advance to test resistance at $67 and then the consensus price target to approach $75.