Analysts are very conservative with FY2000 revenue forecast.
Last Q Jabil did $523M, and the AugQ should come in slightly higher. The new Nortel contract is huge, but I think the analysts are only using about $250M annually for this contract. It wouldn't surprise me to see $100M quarterly from this contract by AugQ of 2000. This is based on how conservatively Jabil initially estimated the HP contract, and based on the large scope of the Nortel contract as announced in the press releases last fall. Clearly Nortel Networks expects Jabil to be one of their largest (if not the largest) EMS supplier. Since Nortel Networks already had EMS suppliers in the $200M range, why the big press release, and the big hoopla? They completed an inhouse analysis to reduce the number of suppliers, and Jabil came up the big winner. Clearly the Nortel business will eventually be much larger than what is in the analyst models. The clincher to me, is that I believe Jabil has opened the San Jose plant, and the Massachusetts plant in part, to better serve Nortel Networks.
The Dell contract should eventually be even bigger. Jabil has spent a year getting ready for the Dell programs, and based on all the prep work, it appears to be at least $500M annually. By the end of the following year, I believe the Dell business could hit a billion dollar annual run rate. The analyst models don't include this number; I suspect they are using $300-400M annually.
Using a normal ramp, and assuming that both programs are underway already, then Dell and Nortel should contribute about $500M in revenue growth for full FY2000. HP's business should continue its ramp, and should contribute around $150M in increased revenues. And other new customer programs should contribute another $150M in increased revenues.
The increased revenues from these sources and the GET acquisition, will allow Jabil to get more Cisco programs. Jabil is Cisco's preferred EMS supplier, but they limit thier business to Jabil to around 20% of Jabil's revenues. So when Jabil increases their non-Cisco revenues, they are able to get more Cisco business. This is what happened after the big HP deal. I expect we will see an additional $150-200M in Cisco business in FY2000.
Add all this up, and I get $950-1000M in increased revenues for FY2000, before the contribution for GET. Since the company said the acquisition won't be dilutive, then I'll ignore GET revenues, earnings, and share dilution in coming up with an EPS estimate.
Using the JunQ revenue run rate of $2100M, and adding $1000M in revenue increase (without GET), I forecast FY2000 revenues will likely come in at $3100M. If I reduce the gross margin to 11% from the JunQ 11.4%, I get $340M in Gross Profit. Less $90M for SG&A, R&D, and Interest, leaves me with $250M BT Income. Using 35% tax rate leaves us with $156M in Net income. Using 88M diluted shares, the diluted EPS should come in at around $1.77 versus $1.11 this year. Now this is not a conservative estimate, but it is a realistic estimate. The company is almost certainly guiding to a much lower number at the present time, but eventually as unknowns and uncertainties are resolved, the estimates should begin to climb.
The NovQ should see a big sequential spike in revenues and earnings. It will be the first full Q for the Nortel and Dell programs which should add about $80-100M to sequential revenues. The HP and other business hits a seasonal high which should add about $40-50M to sequential revenues. And we add GET to the mix for the full Q, which should add $65-70M to revenues. Jabil should report about $740M, up from around $525-530M in the AugQ.
The next two quarterly reports should be interesting.
All this is my opinion and analysis, and can be disregarded freely by anyone.
Paul |
