Shares of Jabil Circuit (JBL) fell in afternoon trading after the electronics manufacturing services company reported preliminary fourth quarter results below last year and said it planned to realign its capacity and administrative support infrastructure. Following the earnings report, Needham cut the stock to Hold while UBS maintained a Buy rating.

EARNINGS/GUIDANCE: After the market close yesterday, Jabil reported preliminary Q4 core earnings per share of 28c on revenue $4.4B, higher than analysts' estimates for 25c and $4.27B, respectively, though below last year's 53c and $4.68B, respectively. Looking ahead, the company guided for Q1 core EPS in the range of 54c-74c on revenue in the range of $4.8B-$5B. Analysts expect Jabil to report Q1 EPS of 62c on revenue of $4.88B.

REALIGNMENT PLAN: In addition, Jabil Circuit announced its intention to realign its global capacity and administrative support infrastructure in an effort to "optimize organizational effectiveness in a more moderate growth environment." The company said it expects the realignment to result in roughly $195M in total charges over a two year period, with $120M-$150M expected to be recorded in fiscal 2017 and the remainder during fiscal 2018. Jabil estimates that the cash component of such actions is $50M, of which $25M will be incurred in FY17.

STREET RESEARCH: Following the earnings report, Needham analyst Sean Hannan downgraded Jabil to Hold from Buy, saying that while the earnings beat and guidance are "healthy," FY17 is unlikely to be a "robust" year. The analyst noted that the share position and relationship with Apple (AAPL) appears to be consistent and healthy, but says the magnitude of customer sell-through creates "the big question" for FY17 growth. Hannan noted that, on the positive side, he believes that Nypro and EMS are doing well and will provide at least some offsets. The analyst added that, while the next quarter seems healthy due to a seasonal uptick, Apple business from the iPhone 7 will require a "fair amount of monitoring" and could continue to have negative year-over-year comps for much of FY17 as Jabil does not seem to have the same level of visibility or confidence into volume success of the platform. UBS analyst Steven Milunovich maintained a Buy rating and $27 price target on Jabil Circuit, saying that the company's relationship with Apple appears to be solid, though the company would like to cut Apple to less than 20% of revenue. The analyst noted that Jabil did not provide full year EPS guidance due to the unpredictability of Apple, but added that free cash flow looks solid and should support a higher stock price.

PRICE ACTION: In afternoon trading, Jabil Circuit fell 5.12% to $22.51.