Great forward looking statements in cc.
The AugQ was hit pretty hard by the slack capacity in Scotland. In the conference call, they said HP contributed about $30M in revenues in the AugQ. Since they did $310M in the MayQ, then Jabil's historic business units saw a revenue decline of about $23M. From the comments, we can surmise that most of this was due to the slack capacity in Scotland this quarter. I had hoped their forecast of flat revenues from last Q didn't include any revenues from the HP plants, but it must have included some. In hindsight, my revenue forecast for this Q was too high because of this.
But Sansone did say that he expects 42% revenue growth in the Fall Q, and 39% growth in operating income. In the Winter Q he expects operating income to grow another 9%. For the NovQ that puts revenues at $450M. Given that operating income was $20.5M this Q, that puts the NovQ at $28.5M. Using interest at 0.5% of revenues and a tax rate of 35%, I get Net AT Income of $17M. Divide by 38.5M shares and I get 44 cents per share. If the current consensus is 38 cents for the NovQ, we should see the consensus estimate raised by 6 cents per share to be consistent with the statements made in the conference call.
They said that all sectors should grow above target in the NovQ. Since their target is 30% annually, that translates to 7% per Q. So Communications, Peripherals, PC sector, Automotive, and Consumer sector will all grow more than 7% this quarter. This is good news, and shows that business is strong across all their product sectors.
I still think that Jabil management is soft-selling the growth they expect this year. Essentially they are saying they have forecasted growth at around 30% for their base business units, and add the former HP business units revenues to that. This adds $385M plus say $600M for the HP units to the $1277M, and gets a revenue forecast of $2.2 to $2.3B for FY99. But they did say they are still selling into the FY99 year (which started September 1), and it takes about three months average to get production up once the customer gives a firm yes. There is plenty of time to see revenues from new contracts.
We should see some more significant contracts, especially given all the hints of "more outsourcing work coming from traditionally vertically integrated OEMs". Their forecast is consistent with about $550 to 600M for the AugQ99. I still think we could hear about several other new contracts, and expect $800-900M by AugQ99. And if not then, then certainly by NovQ2000 when the new laptop contract(Dell) kicks in full bore. And I tend to believe the rumors of an impending Lucent deal, and this is what may make the difference between their forecast and what I think may very well happen.
All in all, the forward looking statements constructed a strong growth forecast for FY99 that currently isn't in the analyst's earnings estimates. We will see these estimates revised upward. And there is plenty of room to raise them again next Q, and the Q after that, etc.
Paul |
