Health, cars, fast internet, eco-friendly packaging propel Jabil’s earnings

Jabil has strong momentum as it enters the second half of its fiscal year.

CEO Mark Mondello credits a diversification strategy that allows Jabil (NYSE: JBL), a manufacturing services firm, to be resilient.

On Tuesday, Jabil, the largest company headquartered in St. Petersburg, reported significant gains in earnings and revenue for the three months ended Feb. 28, the second quarter of the company’s fiscal year. The company also raised its financial outlook for the rest of FY 2021.

Michael Dastoor, CFO, Jabil

During a conference call with analysts, Mike Dastoor, chief financial officer, highlighted several trends that are expected to drive growth.

Health care. “The industry is undergoing tremendous change due to rising costs, aging populations, the demand for better health care in emerging markets, and the accelerated pace of change and innovation. Consequently, we are witnessing health care companies shifting their core competencies away from manufacturing towards innovative and connected product solutions.

“We’re in the early days of outsourcing of manufacturing in the health care space. On top of this, we are also seeing the impact of connectivity and digitization across health care. I expect these trends to accelerate over the next few years. Our deep domain expertise within the health care industry uniquely positions us to build technology-enabled products that help our customers excel in today’s evolution of health care.”

Automotive. “Today, electric vehicles account for less than 2 percent of total vehicles in the market. Climate change, fuel efficiency and emissions are ongoing concerns and regulatory policies worldwide are beginning to mandate more eco-friendly technologies. As a result, OEMs [original equipment manufacturers] are making a substantial investment into vehicle electrification efforts.

“Jabil’s long-standing capabilities and over 10 years of experience and credibility in this space has positioned us extremely well to benefit from this ongoing trend.”

5G, or 5th generation technology that allows for faster internet. “5G will transform the way we live, work, play and educate. As the underlying infrastructure continues to roll out, 5G adoption is accelerating.

“Jabil is well positioned to benefit from both the worldwide infrastructure rollouts and with devices which would be needed to recognize the full potential of a robust 5G network.”

Dastoor also said Jabil would benefit from a shift to smart and eco-friendly packaging. In January, the company bought Ecologic Brands, which makes sustainable, paper-based packaging for the consumer packaged goods industry, and earlier this month, Jabil said it would invest $25 million in expanding paper-based packaging production.

Mark Mondello, Jabil CEO

“We have a wonderful roadmap internally around sustainable packaging, and this is kind of a second or third step for us,” Mondello said. “We believe that we’ll be able to take that technology, and as we look towards fiscal ’22, fiscal ’23, give that technology exposure to bigger brands that we support based on our balance sheet, our scale and our relationships.”

For Q2 2021, Jabil reported $151.7 million in net income, or 99 cents a share, compared to a net loss of $3.3 million or 2 cents a share, in the same period a year ago. Revenue for Q2 2021 was $6.8 billion, up 11.5 percent from a year earlier.

The company is projecting $28.5 billion in revenue for the full fiscal year, and about $5 a share in core earnings.