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

To: GuyNixon who wrote (5020)	3/17/1999 12:00:00 PM
From: kolo55	Read Replies (2) \| Respond to of 6317

The guy knows nothing about ECM or Jabil. Further his numbers are outdated. Lets take the post apart: To: +Michael D.Burke From: +Michael D.Burke Tuesday, Mar 16 1999 5:49PM ET Reply #52153 of 52354 To All, Jabil's earnings stank the house out. Up 7 percent for the quarter, less than 2% for the six months. That sounds like mighty light growth for a co. selling at 55 times eps. Using trailing earnings is nonsensical for a company that just went through a hiccup year, and is expecting much better results from announced new programs in the next three quarters... operating earnings sequentially up 7% next Q, 15% the next, and probably another 15% the next. Here are a few highlights: 1. Cash continues to fall, down 21% since August. Rihgt after the Q end, Jabil completed a secondary raising close to $200M, paid down their line of credit $80M, and has $100M cash right now. They also spent $51M on CapEx in this the 2nd fiscal quarter, when they were expecting to spend $100M in CapEx all year... this reduced cash before the secondary, but is very bullish for growth going forward. They are building a lot of new facilities for new customer programs that they have landed. 2. Inventories up 27%. 3. Receivables up a whopping 65%. Both Inventories and Receivables were up due to acquisitions and new business. Inventory turns increased to 11 this Q, which I believe is the best in the sector, and means that they are turning over inventory faster than before. The higher Q end inventory levels are also a clue that the big new programs were still ramping at the end of the quarter. Receivables DSO increased from 46 to 48, and this isn't much of a change. This is a pretty good DSO number. 4. Long term debt up 49%. After the secondary, Jabil's Debt to capitalization ratio fell from 30% to 10%, which is quite low in the sector. They have strengthened the balance sheet preparing for the big telecom outsourcing programs coming this year and next (and probably beyond). The telecoms are preparing to outsource a big chunk of the $50-60B a year they spend on Cost of Goods Sold over the next several years. Since Jabil is a lead player in communications equipment assembly (Cisco, 3Com, Nortel Networks 'old Bay Networks' etc.), they are prepared to get quite a bit of this business. This pretty much locks in a 50-80% revenue growth rate for the next several years. 5. SG&A was up 62%. 6. Interest expense up 47%. Jabil is obviously adding capacity into the IT glut, and, since like most tech cos., they have no free cash flow, they have to take down debt to do it. That leverages the future. If things work out, great. If not, this roll of the dice could be very costly. Of course, all we will hear is they "beat their number." Set the bar low enough... I don't think the big buyers of Jabil were buying based in this Q's earnings... they're buying expecting to see the revenue and earnings growth I mentioned above. Feel free to post a link to this post on MD's thread. Paul