Jabil Circuit Inc. (JBL - Analyst Report) reported stronger-than-expected third quarter fiscal 2016 results but lowered its outlook for the remaining of fiscal 2016. Jabil also announced a new share repurchase program worth $400 million. 

Adjusted earnings (including share-based compensation but excluding all one-items) of 10 cents per share and revenues of $4.31 billion topped the Zacks Consensus Estimate of 5 cents and $4.17 billion, respectively. However, on a year-over-year basis, revenues fell 1.1%.

Electronics Manufacturing services revenues (66% of revenues) came in at $2.85 billion, up 4% year over year due to strong demand from telecommunications customers. Diversified Manufacturing Services revenues (34% of revenues) decreased 9% year over year to $1.45 billion due to declining demand for mobility products.

JABIL CIRCUIT Price, Consensus and EPS Surprise

JABIL CIRCUIT Price, Consensus and EPS Surprise | JABIL CIRCUIT Quote

Operating Details

Gross margin contracted 120 basis points (bps) on a year-over-year basis to 7.4%.

Operating expenses as a percentage of revenues increased 60 bps year over year to 6.1%. Selling, general and administrative expenses (as a percentage of revenues) increased 40 bps to 5.6% on a year-over-year basis.

Operating income decreased to $59.6 million from $135.4 million in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the quarter, cash and cash equivalents were $887 million, down from $913.9 million as on Aug 31, 2015.

Cash flow from operations for the first nine months of fiscal 2016 was $487.9 million compared with $882.9 million in the first nine months of fiscal 2015.

Guidance

The company has further lowered its outlook for the fiscal 2016 while initiating guidance for the fourth quarter of 2016.

For the fourth quarter, Jabil expects total company net revenue to decline 9% in the range of $4.15 billion to $4.35 billion while core operating income is estimated in the range of $95 million to $125 million.

On a year-over-year basis, revenues from Diversified Manufacturing are expected to decrease 20% given softness in mobility buisness, while Electronics Manufacturing Services revenues are expected to be flat on a year-over-year basis.

The company expects GAAP earnings in a range of loss of 2 cents to earnings of 19 cents per share, including 5 cents for amortization of intangibles, 9 cents of stock-based compensation expense and 2 cents – 3 cents as restructuring charges.

For fiscal 2016, management expects revenues now to be $18.2 billion compared with $18.5 million projected earlier, and core diluted earnings of about $1.85, a far cry from $2.12 per share projected earlier. GAAP earnings are expected to be $1.20 compared with $1.48 per share estimated earlier.

Currently, Jabil Circuit has a Zacks Rank #3 (Hold). Better-ranked stocks in the technology space include Carbonite, Inc. (CARB - Snapshot Report) , Sanmina Corporation (SANM - Snapshot Report) and Ebix Inc. (EBIX - Snapshot Report) .All carry a Zacks Rank #1 (Strong Buy).