Will Revenue Contraction Affect Jabil's Q4 Earnings Results?

Jabil Inc. JBL is set to release fourth-quarter fiscal 2024 results on Sept. 26, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 2.16%. It pulled off a trailing four-quarter earnings surprise of 3.10%, on average.

The leading global supplier of electronic manufacturing services is likely to witness a revenue contraction year over year in the fourth quarter of fiscal 2024. Soft demand trends in some end markets and macroeconomic challenges are likely to impede the top-line growth. Initiatives to improve profitability and free cash flow are positives.

Factors at Play

Jabil is placing a strong emphasis on integrating sophisticated AI and ML capabilities to enhance portfolio offerings and improve the efficiency of its internal process. Growing demand for AI infrastructure in data center space, along with AI proliferation in cloud, networking and industrial automation end markets are major tailwinds. Jabil's focus on end market and product diversification, coupled with its large-scale global operations, offers a high degree of resilience during times of macroeconomic and geopolitical disruption. Management's focus on operational efficiency and effective working capital management is boosting profitability and free cash flow.

However, demand softness in several key end markets, including 5G, renewable energy, digital print and healthcare is weighing on net sales. The company's automotive vertical is also experiencing headwinds as the Chinese automotive market grapples with overcapacity and high inventory levels. Moreover, the launch of new electric vehicle platforms has been postponed by several quarters. These factors are likely to have impeded revenues in the fourth quarter of fiscal 2024. The company's strategy to move away from less prospective markets by restructuring and reshaping its portfolio will impact top-line growth in the near term.

The Zacks Consensus Estimate for the DMS vertical is pegged at $3.384 billion, indicating a decline from $4.436 billion reported in the year-ago quarter. Revenues from the EMS vertical are pegged at $3.169 billion, implying a downtrend from $4.022 billion in the year-ago quarter.

For the August quarter, the Zacks Consensus Estimate for revenues is pegged at $6.573 billion, which indicates a decline from the year-ago quarter's tally of $8.458 billion. The consensus estimate for earnings is pegged at $2.23, suggesting a decrease from $2.45 reported in the prior-year quarter.

Earnings Whispers

Our proven model doesn't conclusively predict an earnings beat for Jabil this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.22%.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Accenture ACN is set to release its quarterly numbers on Sept. 26. It has an Earnings ESP of +0.37% and a Zacks Rank #2.

The Earnings ESP for Carnival CCL stands at +2.99%. The company carries a Zacks Rank of 3. It is scheduled to report quarterly numbers on Sept. 30.

The Earnings ESP for Costco Wholesale COST stands at +0.62%, and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Sept. 26.

To read this article on Zacks.com click here.