Will Jabil Circuit’s Revenues Rise with the iPhone 7 Release?




On March 16, 2016, Jabil Circuit (JBL) provided fiscal 3Q16 revenue guidance of $4.1 billion–$4.3 billion with US GAAP (generally accepted accounting principles) operating income in the range of $46 million– $71 million. EPS (earnings per share) are projected to be in the range of $0.12–$0.18. In contrast, analysts had estimated revenues of $4.7 billion for JBL in fiscal 3Q16.

The outlook for fiscal 2016 revenue has been updated to approximately $18.5 billion, with GAAP EPS of $1.48 and non-GAAP EPS of $2.12. “Our updated outlook for the third quarter reflects reduced demand in mobility,” said CEO Mark Mondello. “The strength in our EMS business further illustrates the positive impact of our portfolio strategy. A strategy well grounded in diverse income streams.”

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Is this an indication of lower iPhone sales?

Jabil Circuit generates approximately 25% of its revenues from Apple (AAPL). Its lowered guidance for fiscal 2016 has disappointed investors. The company has blamed reduced demand from the mobile sector for the weak forecast. It will be interesting to see Apple’s performance in fiscal 2Q16, as rumors of lower iPhone sales have been ringing loud since November 2015, when a number of investment firms lowered iPhone estimates.

Shares of Jabil Circuit fell 6% to $21.96 on March 16, 2016, in after-hours trading. Shares of Apple suppliers Qorvo (QRVO) and Skyworks Solutions (SWKS) fell 0.6% and 1%, respectively, on March 16.

Later this month, Apple is expected to unveil a smaller phone. It may also launch the iPhone 7 and iPhone 7 Plus in September 2016. This is largely expected to drive Jabil Circuit’s revenues in the coming quarters.

Apple constitutes 11.3% of the PowerShares QQQ ETF (QQQ).


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