Jabil Delivers Again
September 20, 2000 - 7:35am
Credit Suisse First Boston Corporation
Jabil Circuit (JBL)
Delivers Again; Raising EPS and Price Target
Summary
Jabil Circuit reported F4Q00 EPS of $0.24, in-line with
Street expectations.EPS grew 15% sequentially and 66% year over year.
Sales of $1.07B were higher than our $1.05B forecast due
to continued strength from Comms customers.
As JBL continues to accelerate business and win market
share with Comms OEMs(i.e., CSCO and NT), we believe the
company is well positioned to exceed its guided revenue
and EPS targets for F01.
We are raising our F01 revenue to $5.5B from $5.0B
previously (above mgnt's guidance of $5.2B), reflecting
54% growth yoy.
Our new F01 EPS of $1.20 (from $1.12) represents 50% growth
yoy. We note that of our total $0.08 EPS increase, $0.02
stems from lower tax rate and $0.06 from operations
(mainly driven by higher revs).
New price target of $70 (from $55) assumes a 50x P/E
multiple applied to $1.40 (midpoint of F01 and F02 EPS
of $1.20 and $1.60, respectively). Reiterate Buy.
Price Target Mkt.Value 52-Week
09/19/001 (12mo.) Div. Yield (MM) Price Range
USD 60.31 $70 None $12,491.9 $68-23
Annual Prev. Abs. Rel. EV/ EBITDA/
EPS EPS P/E P/E EBITDA Share
8/02E $1.60 37.7X 168% $2.27
8/01E 1.20 1.12 52.7 225% 1.60
8/99A 0.80 79.1 314% 1.19
Nov. Feb. May Aug. FY End
FY02E NA NA NA NA Aug. 31
FY01E $0.25 $0.28 $0.31 $0.35
FY00A 0.17 0.18 0.21 0.24
ROIC (12/98)
Total Debt (F00) $33.0
Book Value/Share (F00) $6.78
WACC (12/98)
Debt/Total Capital (F00) 2.6%
Common Shares 197.5
EP Trend2
Est. 5-Yr EPS Growth 33.0%
Est. 5-Yr. Div. Growth
1 On 09/19/00 DJIA closed at 10,789.29 and S&P 500 at 1459.9.
2Economic profit
trend.
Note: Calendar EPS estimates for 1999-2001E: $0.59; $0.88E; $1.30E
Jabil Circuit is a leading CM of datacom, workstation and
computer peripherals products with F00 sales of $3.6
billion, with expected revenue growth of 50% in F01.
Investment Summary
Valuation and Outlook
As Jabil continues to accelerate business and win market
share with communications OEMs (i.e., Cisco and Nortel
Networks), we believe the company is well positioned to
exceed its guided revenue and EPS targets for fiscal 2001.
As such, we are raising our fiscal 2001 revenue to $5.5
billion from $5.0 billion previously (above management's
guidance of $5.2 billion), reflecting 54% growth year over
year.
Our new fiscal 2001 EPS of $1.20 (from $1.12) represents
50% growth year over year. We note that of our total $0.08
EPS increase, $0.02 stems from the lower 29% tax rate going
forward and $0.06 from operations (mainly driven by higher
revenues).
Although the stock is only 12% below its 52-week high of
$68, we believe the company's visibility (particularly
in F2H00) is exceptionally strong and will likely be the
catalyst to report upside to earnings over the next several
quarters.
Our new price target of $70 (from $55 previously) is
calculated using the midpoint of our new F01 EPS of
$1.20 and introducing a F02 EPS of $1.60.
Applying a 50x P/E multiple (in line with the company's
EPS growth rate for fiscal 2001) to this $1.40 EPS average
generates a $70 price target. This represents a 17% price
appreciation from current levels.
We reiterate our Buy on shares of Jabil Circuit.
Fiscal 4Q00 Financial Results (Note: Comparisons are on
a pro forma basis with GET Manufacturing)
Jabil reported fiscal 4Q00 EPS of $0.24 in line with our
expectations and Street consensus of $0.24.
Year over year, fiscal 4Q00 EPS grew 66% from $0.14
in fiscal 4Q99.
Sequentially, EPS grew 15% from $0.21 in fiscal 3Q00.
Total sales of $1.065 billion were $15 million higher
than our expectation of $1.05 billion owing to continued
strength with communications customers.
Sales grew 77% from $602 million in fiscal 4Q99 and grew
10% from $966 million in fiscal 3Q00.
Gross margins of 10.0% were in line with expectations, and
were slightly offset by start-up costs at greenfield
locations (Hungary, Mexico and Malaysia).
Gross margins of 10.0% compare with 11.1% in fiscal 4Q99
and 9.8% in fiscal 3Q00.
SG&A of 3.7% was 10 basis points higher than our forecast
of 3.6%, due to start-up costs at greenfield sites. SG&A
of 3.7% compares with 4.3% in fiscal 4Q99 and 3.6% in
fiscal 3Q00.
Inventory levels increased 16% sequentially to $478 million
from $410 million in fiscal 3Q00.
Inventory turns were flat at 9.1x.
ROA decreased sequentially to 10.8% from 11.0% and ROE
decreased sequentially to 19.2% from 22.8%.
Component Shortages
Management indicated that the component market appears more
stable compared with previous 3-4 months.
However, management expects tight supply environment to
continue in mid-year 2001 and was probably the cause of
F4Q00 revenues not growing much faster than our projection.
End Market Breakdown
End Market F4Q00 F3Q00 Seq % Chg F00 F01E*
Comms. 52% 48% 18% 44% 50%
Peripherals 24% 27% -4% 21% 17-18%
Computers 18% 19% 3% 21% 17-18%
Subtotal Comp. 42% 46% -1% 42% 34-36%
Auto 2% 2% 11% 6% 5%
Consumer 4% 3% 25% 8% 8%
Other 0% 0% 0% 0% 0%
Total 100% 100% 9% 100% 100%
Note: Figures may not add due to rounding.
*Company estimates. |
