On Monday, Goldman Sachs (NYSE:GS) maintained its Buy rating on Jabil Inc. (NYSE:JBL) with a steady price target of $136. Jabil's fourth quarter fiscal year 2024 earnings surpassed expectations, with revenue reaching $7.0 billion and non-GAAP earnings per share (EPS) at $2.30. These figures exceeded the average analyst predictions of $6.6 billion in revenue and $2.22 EPS.
Jabil's forecast for fiscal year 2025 includes revenue of approximately $27 billion, EBIT margin of 5.4%, and core EPS of $8.65. This outlook is in line with revenue expectations but suggests a slight decrease in EBIT margin compared to the previous year and is modestly below the consensus EBIT margin estimate of 5.5%.
Despite the lower-than-expected margin guidance for FY25, Goldman Sachs views the report as mixed, noting that Jabil's business restructuring—particularly after selling its Mobility division—positions the company favorably in what are expected to be more advantageous markets in the long term. These markets include data centers, automotive, industrial, renewables, and medical sectors.
The company's strategic investments are highlighted by the addition of two new hyperscale customers in the silicon photonics space. Goldman Sachs also anticipates a recovery in demand in currently soft markets, such as automotive and renewables, which could lead to improved cost absorption and margin growth. Furthermore, the firm notes that Jabil's capital allocation strategies are expected to continue supporting EPS growth.
In summary, Goldman Sachs reaffirms its positive stance on Jabil's stock, citing the company's strategic focus on growth markets and its potential for improved financial performance in the future.
In other recent news, Jabil Inc. reported robust financial results for the fourth quarter and fiscal year 2024, with Q4 revenues reaching approximately $7 billion. The company also completed a $2.5 billion share repurchase program and announced a new $1 billion buyback plan for fiscal year 2025. Jabil's projected revenues for Q1 FY '25 are expected to range between $6.3 billion and $6.9 billion, while the full-year forecast anticipates $27 billion in revenue.
The company has strategically reorganized into three segments - Regulated Industries, Intelligent Infrastructure, and Connected Living & Digital Commerce - to enhance focus and growth potential. It is also committed to returning 80% of free cash flow to shareholders. Jabil has divested its Mobility business for $2.2 billion and plans to return much of the proceeds to shareholders.
These recent developments signify Jabil's focus on profitable growth and shareholder returns. The company's strategy of investing in healthcare, automotive, and data centers is expected to drive growth, while new facilities in the Dominican Republic and Croatia are set to support medical device production.
InvestingPro Insights
Jabil Inc.'s recent performance and future outlook are further illuminated by real-time data from InvestingPro. The company's P/E ratio of 11.34 and P/E ratio (Adjusted) of 14.52 for the last twelve months as of Q4 2024 suggest that the stock may be undervalued relative to its earnings, aligning with Goldman Sachs' Buy rating. This is reinforced by an InvestingPro Tip indicating that Jabil is trading at a low P/E ratio relative to near-term earnings growth.
Despite the lower-than-expected margin guidance mentioned in the article, Jabil's financial health appears robust. The company boasts a market capitalization of $13.88 billion and has generated revenue of $28.88 billion in the last twelve months as of Q4 2024. An InvestingPro Tip highlights that Jabil is a prominent player in the Electronic Equipment, Instruments & Components industry, which supports Goldman Sachs' positive outlook on the company's positioning in advantageous markets.
Investors should note that Jabil has maintained dividend payments for 19 consecutive years, demonstrating a commitment to shareholder returns. This, coupled with the InvestingPro Tip that management has been aggressively buying back shares, suggests a strong focus on creating shareholder value.
For those seeking a deeper analysis, InvestingPro offers 14 additional tips on Jabil, providing a comprehensive view of the company's financial standing and market position.
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