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Technology Stocks : Jabil Circuit (JBL) -- Ignore unavailable to you. Want to Upgrade?

To: Michael Hart who wrote (6288)	2/6/2005 4:26:31 PM
From: Asymmetric	Respond to of 6317

CSFB upgrade sparks Jabil Circuit By Susan Lerner, CBS MarketWatch Last Update: 4:08 PM ET Jan. 31, 2005 A bullish call from Credit Suisse First Boston boosted Jabil Circuit's shares Monday, with the broker telling clients the electronic manufacturing services company is "smelling like a rose" in the wake of rivals' disappointing results. Encouraged by what he sees as building customer momentum and improving demand, analyst Michael Walker raised his recommendation on the St. Petersburg, Fla.-based company (JBL) to "outperform" from "neutral" while lifting his price target to $28 from $25. Walker left his earnings forecasts for Jabil -- $1.25 a share in fiscal 2005, rising to $1.55 in fiscal 2006 -- unchanged. The stock gained 40 cents, or 1.7 percent, to close at $23.57. "The recent bout of competitors' earnings misses and charges make JBL's generally consistent execution and industry-high revenue growth that much more attractive," Walker wrote in a research note. Last week, Celestica Inc. (CLS) reported an $810 million loss as it recorded $836 million in accounting-related charges and said it would cut up to 825 jobs over the next 15 months as part of ongoing restructuring efforts. See full story. Meanwhile, Sanmina-SCI (SANM) posted weaker-than-expected results and issued a disappointing outlook, attributed to slowing demand and depressed margins in its components business. Flextronics International, however, posted numbers that slightly topped analysts' forecasts. Read more. Shares of Jabil, Walker noted, has pulled back 14 percent since mid-December, when the company reported "solid numbers but disappointed investors looking for better inventory turns." But the analyst believes the company's customer prospects have been improving rapidly into 2005. "For the first time in perhaps a year or more, we believe that Jabil's top customers -- Philips (PHG) and Cisco -- as well as one of its most important growth customers -- Nokia (NOK) -- are all seeing trends that are likely translating into improving demand for Jabil," Walker said. As a result, Walker said he would not be surprised to report some upside in its results for the fiscal second quarter ending Feb. 28 in the consumer segment, where he's projecting revenue down 30 percent on a quarter-over-quarter basis, or in the networking segment, where he expects flat quarter-over-quarter revenue after declines in the previous two quarters. In addition to growth from existing customers, Walker believes Jabil is aggressively pursuing EMC Corp. (EMC: news, chart, profile) as a potential source of new business. "Our checks indicate that JBL's strong relationship with Cisco is translating into new wins with EMC, and that EMC is consolidating its electronic manufacturing services supplier base to the benefit of JBL," the analyst said. He thinks the new relationship initially would be worth about $50 million annually and could approach $100 million to $200 million within a few years. Finally, Walker expects Jabil will show significant improvement in inventories management during 2005, due in part to a new management compensation plan that assigns a heavy weighting to inventory performance. Jabil Circuit Targeting EMC As 'Next Big Customer' Forbes 01.31.05, 9:27 AM ET forbes.com Credit Suisse First Boston upgraded Jabil Circuit to "outperform" from "neutral" based on the expectation that the electronics manufacturing services (EMS) firm will increase customer momentum. "Although the stock has pulled back 14% from December levels on the calendar first quarter seasonal trade and disappointment over inventory levels last quarter, we believe Jabil's customer momentum and traction is accelerating entering 2005," CSFB said. Jabil is targeting EMC as its" next big customer," the research firm said. "Our checks indicate that Jabil's strong relationship with Cisco is translating into new wins with EMC, and that EMC is consolidating its EMS supplier base to the benefit of Jabil," it said. "We believe Jabil is benefiting from EMC's effort to consolidate its EMS supplier base from eight to three, with the final three being Celestica, Benchmark Electronics (BHE), and Jabil." The potential relationship with EMC will initially be worth approximately $50 million annually and could approach $100 million to $200 million "within a few years," according to CSFB. The research house maintained its 2005 and 2006 earnings-per-share estimates for Jabil at $1.25 and $1.55, respectively, but raised the price target to $28 from $25. In addition, CSFB said recent earnings misses in the EMS sector have made Jabil's "generally consistent execution and industry-high revenue growth that much more attractive." It added, "The last two months have witnessed dramatic and surprising revenue shortfalls from Solectron (SLR) and Sanmina-SCI (SANM), along with an eyebrow-raising series of charges and write-offs from Celestica. Only Flextronics among the top EMS companies (with Benchmark yet to report) has reported clean calendar fourth-quarter results, and its year-to-date stock performance reflects it."