Jabil's Drop Is Your Opportunity

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Fun fact: the name of Jabil Circuit (NYS: JBL) is a combination of the founders' first names. If Bill Morean and James Golden had gone with their last names instead, we might have been talking about Moregold Circuit today.

That would have been a preposterous name in recent years, as Jabil has struggled to stay profitable. With razor-thin profit margins, the key to Jabil's success has always been to keep massive revenues flowing through the company.

These days, that plan is working out just great:

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Jabil Circuit Profit Margin Chart by YCharts

In the just-reported first quarter of 2012, sales jumped 6% year over year to $4.3 billion. The electronics manufacturing service delivered $0.65 of core earnings per diluted share (a non-GAAP number), up from $0.61 per share a year ago.

Management points to a more diverse and profitable business mix plus a focus on operating efficiencies. These factors helped the company expand operating margins and net earnings even in the face of economic worries that slowed down sales growth somewhat. "We are on track to deliver another record year in fiscal 2012," says CEO Tim Main.

I like what I see in Jabil's business trends. So does analyst firm Needham, calling Jabil "the best name today in electronic manufacturing services." Share prices dipped 3.7% on the report, erasing gains made in the last few days. No biggie.

Jabil is the only major electronics manufacturing stock that has beaten the Dow Jones Industrial Average over the past year. Microcap Nam Tai Electronics (NYS: NTE) almost kept up, but larger rivals Flextronics (NAS: FLEX) and Sanmina-SCI (NAS: SANM) are way behind the curve.

I expect that trend to continue in 2012 and beyond, particularly if the improving sales mix leads to even stronger margins. That's why I'm taking advantage of today's modest price drop to start a thumbs-up CAPScall on Jabil. Moregold is sounding apropos again.

Jabil is one rarely discussed play on the smartphone market. Check out three more ideas on exploiting the mobile revolution next year without ever buying a handset designer.

At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies mentioned. The Motley Fool owns shares of Nam Tai Electronics, andMotley Fool newsletter serviceshave recommended buying shares of Nam Tai Electronics. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. We have adisclosure policy.

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