Jabil (JBL +7%) is seeing a boost today following several key announcements. The electronic circuit board manufacturer has appointed a new CEO, reaffirmed its Q3 (May) and FY24 (Aug) guidance, and removed its FY25 guidance. After projecting bearish Q3 and FY24 guidance in late March, former CEO Kenneth Wilson was placed on paid leave pending a corporate policy investigation, causing the stock to drop over 25% from all-time highs as of yesterday's close.
Despite these challenges, Jabil didn't remain passive. In the month since Wilson was replaced by interim CEO Michael Dastoor, who was formerly CFO, Dastoor has been named the permanent CEO. Amid a volatile economic backdrop, Jabil has established some stability by reiterating its quarterly and full-year forecasts, including Q3 EPS of $1.65-2.05 and revenues of $6.2-6.8 billion, and FY24 EPS of $8.40.
Although Jabil withdrew its FY25 EPS outlook of $10.65 due to the uncertain macroeconomic environment and abrupt CEO change, investors are optimistic. They appreciate Jabil's ability to stay on course to meet near-term guidance despite internal setbacks. The big question now is whether the new CEO can help Jabil resume its broader upward trend.
- Apple (AAPL, Financial) will play a significant role in Jabil's future. Sales to Apple accounted for 17% of Jabil's annual revenue in FY23. Apple had a decent MarQ performance with a massive share repurchase program, but iPhone sales have stagnated and weak demand in China has forced Apple to lower prices. Continued tepid demand could make it difficult for Jabil to achieve positive year-over-year revenue growth.
- A turnaround in Jabil's 5G and renewables businesses is also crucial. Toward the end of Q2 (Feb), Jabil faced an unexpected drop in demand in these markets, leading to a rare top-line miss and margin compression.
- On the positive side, AI has been a beneficial factor. Last quarter, Jabil saw a spike in demand for its AI-related services, resulting in significant gains. For instance, during the first half of FY24, Jabil's AI GPU volume was 200 times higher than in all of 2023. This could be a key factor when Jabil outlines its FY25 guidance next month.
Although Jabil withdrew its FY25 guidance, its ability to stay on track for its FY24 outlook shows strong management despite the unexpected CEO change. With this issue resolved, Jabil can focus on executing accelerated buybacks and ending FY24 on a positive note.
