Goldman Sachs Comments On Jabil Circuit; Sees 26% Upside In The Stock (JBL)

Jabil Circuit JBL has sold off 12% in the past two days, performing substantially worse than the 4% decline in the Nasdaq and 3% drop in the S&P 500 and erasing $600mn in market cap. The catalyst for the sell-off in JBL was the company's announcement Monday evening that it is acquiring three of its former under-performing operations in France and Italy that had been previously divested in July 2010, which will result in a one-time charge of $25-40mn in GAAP earnings. Goldman views this sell-off as a significant overreaction given the acquired operations represent less than 2% of the company's annual sales and therefore should not have a meaningful impact on its business and more importantly, Jabil's drive toward a 5% operating margin. Management commented just last week at its conference that the current growth outlook has improved since the company's earnings release in December. Goldman Sachs reiterates its Buy rating and sees 26% potential upside. Goldman has a $25 PT and Buy rating on JBL JBL is trading higher at $20.53