Stocks To Watch: Is Apple Supplier Jabil In Buy Range As It Finds Key Support?

Apple supplier Jabil (JBL), featured in today’s IBD 50 Stocks To Watch, is in buy range as it scores triple-digit profit growth.


The St. Petersburg, Fla.-based company is a manufacturing contractor with more than 260,000 employees in 30 countries. While Apple (AAPL) accounted for more than a quarter of its revenue in fiscal 2018, Jabil has been diversifying its business.

In late 2018, for instance, it entered a long-term strategic collaboration with Johnson & Johnson (JNJ).

That’s helped Jabil accelerate profit growth. After two quarters of declines, Jabil resumed profit growth that stepped up from 11% to 52% to 154%. Analysts expect a 181% jump for the current quarter, when the company reports in June.

“Our second quarter came in well ahead of expectations, driven by stronger than expected product demand, solid execution, and a well-balanced contribution throughout the entire company,” CEO Mark Mondello said on the fiscal Q2 earnings call.

He noted Jabil has targeted growth over the past few years in select markets that align with secular trends: “A few examples of these being 5G, personalized health care, electric vehicles, digital learning, cloud computing, clean energy, and eco-friendly packaging.”

To that end, Jabil last month opened a health care manufacturing facility in the Dominican Republic.

At 124th out of the 197 industry groups tracked by IBD, the electronics contract manufacturer group is a laggard. Yet, Jabil shows strong fundamental and solid technical ratings, making it one of the top stocks to watch.

Stocks To Watch: Top Ratings

IBD Stock Checkup assigns Jabil a 91 Composite Rating, which gives investors a quick way to assess a stock’s key growth traits. That puts it at the top of the 14-stock contract electronics manufacturers group.

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A 93 Earnings Per Share Rating, part of the overall composite score, also leads the group. It reflects a five-year compound earnings growth rate of 14%. EPS dipped 3% the fiscal year ended in August. But analysts expect a 75% rebound in profit growth for the current year and a 6% increase in fiscal 2022.

On the technical front, an 81 Relative Strength Rating means Jabil is beating 81% of all other stocks. Its relative strength line, which compares a stock’s performance to the S&P 500, has flattened out after a recent advance. An upturn to a new high if the stock rises would be a bullish sign.

Jabil has been testing and finding support at the 10-week moving average the past the past three weeks. Last week, the stock dived as much as 7% to breach the line but pared its loss to less than 2%. It’s finding support again this week, according to MarketSmith chart analysis. Jabil continues to offer a chance to buy or add shares.

But with the market uptrend under pressure, all stock purchases are riskier than before. Read The Big Picture to stay on top of what’s going on in the market each day.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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