Today’s earnings play is Jabil Circuit
(NYSE:JBL), a provider of electronic manufacturing services and solutions. Jabil services include customized product and logistics management solutions, design engineering, and build-to-order product assembly, to name a few.
The company’s net revenue has grown about 60% since 2006, up 23% from 2010 to 2011. Earnings per share has stayed relatively static around $0.60, but analysts are expecting a drop to $0.58, a loss of $0.04 from last year’s Q4 results. Jabil saw a 50% gain in earnings from 2010 to 2011, and analysts are expecting another gain from 2011 to 2012 of about 5%, or $0.11.
Earnings have beat estimates three out of the last five quarters, beating yearly earnings estimates for both 2010 and 2011. Jabil’s stock price has been somewhat inconsistent with earnings, losing $0.98 on a positive earnings surprise in Q2.
The stock opened today at $21.64 and is trading $0.06 up around noon. The 52-week range is 15.65 to 27.40 and the stock is currently sitting around the center of its trading range. The stock hit its high in March this year and fell more than $5.00 by the end of May and early June. Since then, the stock has rebounded slightly but has not made it back over $25. Dividends have been released once a quarter, and have been steady at $0.08 for the past year. The last dividend increase, $0.01, was in November of 2011. The front month (Oct) ATM strangle is trading at $2.75, which suggests about a 10% move.
06/20/12 $19.42 $20.75 $+1.33 (6.8%)
03/21/12 $26.49 $25.88 $-0.61 (-2.3%)
12/21/11 $19.95 $19.40 $-0.55 (-2.8%)
09/28/11 $17.38 $18.84 $+1.46 (8.4%)
Average Magnitude of Post Earnings Return 5.1%
Selling the October 20-19 Put Spread for $.30
$70 per 1 lot
$30 per 1 lot
Why I Like This Trade:
The stock has rallied or sold off less than 3% on every one of the last four earnings quarters. I like this trade because it is bullish, but not aggressively bullish. I want to get Jabil if there is a pullback, and I make money on this trade if the stock is flat, up, or down less than 8.5% between now and October expiration.
No positions in stocks mentioned.