Collins Stewart Reports on Jabil Circuit

Collins Stewart commented on Jabil Circuit JBL in a report released today. In the report, Jabil Circuit was positive in its outlook of the company. Collins Stewart writes, "We believe the EMS industry is past its restructuring wave with industry OM's at ~4% from 1%-2% on average & has a new market opportunity, “AAIIMM” (aerospace, auto, instrumentation, industrial, military, medical). This category changes EMS industry dynamics: Programs are smaller, take longer to ramp & are more complex meaning better margins & stickier business. Jabil has led the AAIIMM charge & has the biggest & fastest growing mix at 36% of rev, up 47% y/y last qtr, vs. Celestica at 17% of mix (+12% y/y), Flextronics at 23% (+26% y/y) & Sanmina at 25% (flat y/y). Jabil's 15% customers, RIMM & Cisco, are seeing slowing growth, & HP warned of lower laser sales due to Canon/Japan, but we believe customer concern is over-blown as: a) the correlation between these customer revs & Jabil's is relatively low; b) customer concentration is decreasing (top 5 has declined to 45% of rev); & c) Jabil's shift to more AAIIMM business creates a more diverse customer base & less dependence on legacy customers while driving margin improvement." Collins Stewart currently has a Buy rating on Jabil Circuit and a price target of $25. Shares of JBL closed at $20.57, down $0.37 from the opening bell.