Jabil Circuit Loses Spark

The contractor of electronics products issues a disappointing outlook, sending the shares lower

Jabil Circuit (JBL) announced stronger revenue during recent months, but the St. Petersburg (Fla.) electronic manufacturing services company continues to struggle to get its accounting straight and improve its manufacturing business. The company also issued a disappointing sales and earnings forecast, sending its stock down 9.9% to $22.47 on Mar. 23.

Jabil said revenue rose $2.9 billion during the quarter ended Feb. 28, up 27% compared to the same period last year. The company expects to have revenue during the May quarter that ranges from $2.9 billion to $3 billion, compared to the consensus forecast for more than $3 billion, according to Thomson Financial.

Jabil Circuit is in the midst of slashing costs and streamlining its manufacturing capacity. In September, the company announced that efforts like layoffs and plant closings would cost it around $120.2 million during its fourth fiscal quarter of 2006. On Jan. 15 Jabil used around $870 million of debt to buy most of the shares in Taiwan Green Point Enterprises Co., Ltd, which has seven plants in China and one in both Taiwan and Malaysia for making things like advanced plastics and metals used in wireless products.

Amid these struggles, the company's earnings per share will range between 17 cents and 23 cents during the May quarter, excluding items. When you include things like restructuring costs, Jabil's earnings are estimated to range between 4 cents and a loss of 8 cents per share. The consensus had been for 44 cents per share, according to Thomson.

The company has its hands full with troubles as well. Jabil hasn't yet filed its 2006 Form 10-K as it continues with an investigation of its stock option accounting.

A few analysts, from firms Bear Stearns, Raymond James and CIBC, downgraded Jabil shares on Mar. 23. Standard & Poor's equity analyst Jay Hingorani cut his target price on the stock by $6 to $30, explaining that he sees lower consumer revenues from acquisition integration and other operational issues during the third and fourth quarters hitting Jabil's overall revenues. But Hingorani also noted that the company's other businesses, like automotive and industrial, are having growth. "We believe new business wins and realignment will improve revenues and margins in FY 08," said Hingorani, who kept a buy opinion on the shares. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

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