Is This Apple Supplier About to Break Higher?

Jabil (NYSE:JBL) has shifted into a higher gear over the past six months, thanks to a turnaround in the company’s financial fortunes despite the uncertainty posed by the novel coronavirus pandemic.

The manufacturing services company had pulled its full-year guidance earlier this year in the wake of the COVID-19 crisis. But it has been showing signs of a turnaround over the last couple of quarters. Jabil’s latest fiscal fourth-quarter results, reported last week, were solid as the company recorded double-digit growth thanks to its largest customer — Apple (NASDAQ:AAPL).

But should investors buy Jabil stock in the hope of more upside after the company’s latest quarterly performance? Let’s find out.

JBL Chart

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Jabil is making a change

Jabil’s revenue for the fourth quarter of fiscal 2020 that ended on Aug. 31 increased 11% year over year to $7.3 billion, which was way higher than analysts’ expectations of $6.3 billion. This is a nice jump over Jabil’s fiscal third-quarter year-over-year revenue growth of just 3%, indicating that the company’s business environment is getting favorable.

However, Jabil was unable to top its strong quarterly results with impressive guidance. The company anticipates $7 billion in revenue at the mid-point of its guidance range this quarter, which would be nearly 7% lower than the $7.5 billion revenue generated in the prior-year period.

The lower revenue this quarter can be attributed to a substantial decline in Jabil’s revenue from its Electronic Manufacturing Services (EMS) segment, which accounts for nearly 62% of the top line. Jabil anticipates a 15% decline in EMS revenue this quarter.

The EMS unit manufactures solutions that are used across a variety of markets such as cloud, industrial, automotive, energy, defense, telecom, smart home, and retail. This segment’s revenue is expected to dip this year because of a change in the business model.

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Jabil expects $4.5 billion in revenue in fiscal 2021 from the 5G, wireless, and cloud…