We already knew that businesses are
buying more chipsthan they used to, and that
consumershave started
buying the end-product gadgetsagain. So it only makes
sense to see stronger business in between those steps,
too.
Jabil Circuit (NYSE: JBL) makes circuit
boards, onto which builders like
Cisco (Nasdaq: CSCO),
Nokia (NYSE: NOK), and
Hewlett-Packard (NYSE: HPQ) mount components
to create their routers,
handsets,
computers, and other electronics. And Jabil CEO Tim Main
says that demand for Jabil's products and services is picking
up again.
"Based upon our current expectations, it appears as though
the worst of the recession is behind us," he said in Jabil's
fourth-quarter report. The company saw a small net profit
again after three quarters of red ink, all thanks to
cost-cutting, a stronger market share, and "a more benign
end-market environment."
Year-over-year, this quarter was far from impressive.
Sales dwindled from $3.3 billion in 2008 to $2.8 billion this
time around. Earnings fell from $0.28 per share to $0.03 per
share -- nearly a 90% shrinkage.
But the fourth quarter was still way better than the rest
of Jabil's year. The company lost $1.2 billion in fiscal 2009
but finished up with a $5.5 million fourth-quarter profit.
Fiscal discipline turned red ink into black despite a severe
loss of sales, and if Jabil can keep that newfound discipline
when revenue returns to normal levels …
well, you know what they say: What doesn't kill you makes you
stronger.
Wall Street has shown the patience of an angel with
Jabil's troubles, as the stock has soared almost 40% over the
last year, even as the S&P 500 lost about 10%. Other
circuit board specialists have beaten the broader market,
too, including 800-pound gorilla
Flextronics (Nasdaq: FLEX) and quick-turn
expert
TTM Technologies (Nasdaq: TTMI). And don't
forget about Jabil's 2.3%
dividend yield.
I still think that chip designers like
Texas Instruments (NYSE: TXN) could be
the best way to profitfrom the resurgent tech sector, but
Jabil is making a strong argument for itself. How would you
ride this wave? Let us know in the comments below.
This article was originally published as
This Ignored Stock Deserves Some Attentionon
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