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Jabil misses estimates, sees lower profits ahead

Jabil Circuit (NYSE: JBL), a leading contract equipment manufacturer, fell short of Wall Street estimates Tuesday with fiscal first quarter earnings of $47.7 million, or 24 cents a share, on sales of $1.1 billion.

Wall Street had expected earnings of 26 cents a share, according to earnings tracking firm First Call Corp. Jabil's sales were roughly in line with expectations for the quarter ending Nov. 30.

Jabil, which gets a big chunk of its sales from the PC sector, said it would delay expansion plans as customers moved to cut inventory levels. Jabil reported strong growth in the communications sector for the first quarter, but indicated that customers were also adjusting inventory. CEO Tim Main indicated that the inventory correction appears to be a short-term problem.

Unlike Solectron (NYSE: SLR), which reported strong results because of strong optical networking demand, Jabil was hit by flat peripheral and PC sales and component shortages, which hurt the company's communications sales.

Jabil was upbeat about plans to diversify its customer base. PC sales represent 35 percent of Jabil's sales, but officials project the company can decrease that margin to 15 percent. Jabil said PC sales will be flat in the second quarter.

Despite the lower-than-expected sequential growth of 6 percent, Jabil's results were a big improvement on a year ago. The company reported earnings of 17 cents a share on sales of $690 million a year ago.

However, investors are likely to focus on Jabil's outlook. The company said it would slow production and miss estimates for its second quarter and fiscal 2001. Officials predicted earnings of $1.02 a share for the year, 14 cents below current projections. For the second quarter, Jabil is projecting earnings of 20 cents a share, 8 cents below consensus estimates.

The company said it expects that customer inventory adjustments will cause an 11 percent sequential decline in operating income for its second quarter. The company was upbeat for the second half of fiscal 2001.

Jabil's largest customers include Lucent (NYSE: LU), Hewlett-Packard (NYSE: HWP), Dell (Nasdaq: DELL) among others.

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