Jabil: Diversified manufacturer grows with technology

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<pre><pre>Jabil: Diversified manufacturer grows with technology

Jabil Inc. is a manufacturing services company that outsources many of the world's largest companies, including Apple, Hewlett-Packard, Magic Leap, Go Pro, Tile, Keysight Technologies and Zebra Technologies. As one of the largest U.S. manufacturers, the company had sales of nearly $ 26.3 billion in the past 12 months to November 30, 2019, and specializes in the automated production of continuous flows. Jabil is always striving to create the next technological innovation in consumer electronics, although the company operates in almost all major industries, including 5G, IoT, 3D printing, augmented reality and digital healthcare.

In simple terms, large-scale technological innovation often leads back to Jabil. As the number of connected devices per person continues to increase worldwide – we increased from 3.47 per person in 2015 to 6.58 per person in 2020 (according to Statista) – the company looks like a proxy to keep up with upcoming trends to bet in technology, the automotive sector and even healthcare. At the time of writing, the company's stock has increased more than 35% in the past 6 months.

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Source: Company presentation

Overall, Jabil's commercial portfolio spanned 8 segments, and first quarter 2020 results showed growth of 15% year over year, core operating margin growth of 3.7% and growth of 17% year over year. In the recent conference call, CEO and Director Mark Mondello addressed the diversity of the company's portfolio:

“Part of our fundamental magic that makes the portfolio so powerful is based on our ability to share technologies in our various businesses efficiently and quickly, with little friction. Each year, our sales are far less dependent on a single product or family, which improves the predictability of our earnings while improving our execution ability. "

Jabil's EMS and DMS segments

Jabil is divided into two segments: Electronic
Manufacturing Services (EMS) and Diversified Manufacturing Services (DMS). The EMS
Segment focuses on computer components, printing and telecommunications, while DMS is
Engineering solutions for technology and materials science. In tax
DMS revenue in the first quarter of 2020 was $ 3.1 billion, an increase of 3% over the previous year
with a core margin of 5.6%. EMS sales increased 26% year over year to $ 4.4
Billions with a core margin of 2.4%.

DMS is the higher-margin segment and often a partner
Collaborate with companies like HP's Multi Jet Fusion
Additive manufacturing system. As an example for another top-class customer
the latter piece of technology is already being made using Jabil's equipment
50,000 mouth shapes a day for DirectSmile ClubAccording to ZDnet.

While DMS represents some of the sexier projects for
As Jabil is known, the global EMS market is growing rapidly and is expected
Global to surpass the $ 650 billion mark by 2024 with an annual growth rate of 7.5%
Banking and finance. The catalyst for this industry growth is consumer demand
shorter time to market and more competition for new products. in addition,
Jabil offers network infrastructure for 5G and, as I have already written
Recently, the 5G network infrastructure will reach $ 4.2 billion, an increase of 89%
from 2019 according to Gartner, Inc.

With his hands in many of the growing technology
Trends gave Jabil a forecast of 4% for the second quarter compared to the previous year
Basis for your DMS segment and an increase of 5% over the previous year for your EMS
Segment due to higher sales in cloud and auto sub-segments.

"We
For the second quarter of the 2020 financial year, we expect total sales of
Range from $ 6 billion to $ 6.7 billion for a 5% increase in the middle of the year
The offer, ”said Mark Dastoor, CFO of Jabil, in the company's earnings call. "Vein
Operating income is estimated at $ 155 million to $ 255 million
Millions with a core operating margin of between 2.6% and 3.8%. "

Growth opportunities and risks

Jabil
is extremely diversified and competent when it comes to acquisitions. The company last year
acquired equipment for the production of medical devices (14 locations were in
the agreement) endoscopy, surgery, spine, trauma and
Instrumentation by Johnson & Johnson. The company believes this
Acquisitions could increase annual sales by $ 1 billion annually. The transfer of
J & J's medical device manufacturing capacity offers high profit margins
that is predictable.

However, a risk factor is how big a footprint is
The company has in China. The company certainly benefits from manufacturing
in China and it has around 44 million square feet of space, but Jabil
is far from dependent on Chinese manufacturing because it has manufacturing space
in 29 countries. This gives Jabil the ability to postpone operations in whole or in part
Expansion of business activities in an existing plant. Furthermore Jabil starts 2020
Restructuring plan in China including downsizing and capacity realignment.

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Shares Contributors: Stephen L. Kanaval

Source: Equities News

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