Jabil's Guidance Shows The Company Doesn't Believe Its Fate Is Tied To Apple

Jabil Inc (NYSE: JBL) surprised UBS’ Steven Milunovich with by raising EPS guidance for fiscal 2018 to $2.60, compared to a $2.52 consensus.

The analyst reiterated a Buy rating and raised the company’s price target from $30 to $35. The increase reflects a shift from calendar 2017 to fiscal 2018 non-GAAP EPS of $2.65, despite leaving estimates “largely unchanged.”

The company’s fiscal third-quarter beat consensus with revenue at $4.5 billion compared to $4.4 billion and non-GAAP EPS of $0.31 over $0.29.

While Q4 guidance was as expected, management’s bullish tone in announcing fiscal 2018 has Milunovich suspecting opportunities for Jabil beyond Apple Inc. (NASDAQ: AAPL), which accounts for 24 percent of Jabil’s revenue.

Jabil Beyond Apple

The guidance suggests that Jabil is confident Apple’s iPhone 8 will be a success, and may also gain from participating in other products such as the new HomePod.

That said, fiscal 2018 non-GAAP EPS and Q4 guidance for the company’s diversified manufacturing services, which rose about $100 million for 26-percent growth year-over-year “wouldn’t occur with a rebound in Apple business,” according to Milunovich.

Milunovich believes the company may seek opportunities in apparel, noting that it is likely in discussion with non-Nike Inc (NYSE: NKE) shoes companies.

Furthermore, “previously lowly contract manufacturers are benefitting” from greater roles in the good they produce and a shift towards more profitable industrial, healthcare, and packaging clients.

At time of publication, shares of Jabil were down 3.23 percent at $29.64.

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