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Jabil Circuit, Inc. (JBL): Should You Be Patient With This Stock?

Moreover, Jabil Circuit, Inc. (NYSE:JBL) is on the verge of closing its acquisition of Nypro. Now, Nypro is a manufacturer of precision plastic products and I would take my chances when saying that Jabil, which ideally doesn’t go out and make big acquisitions, might have spent $665 million on the company to bolster its position so that it can land the contract for a cheaper iPhone.

According to Pegatron, the new assembler of Apple Inc. (NASDAQ:AAPL) products, the smartphone behemoth is preparing a cheaper iPhone model to tap the opportunity it has been missing out so far in the budget-conscious emerging markets. Now, this might have probably led Pegatron to hire 40,000 workers as it would work to assemble a cheaper iPhone, which Apple would probably bring to market next year if we are to go by various rumors going around.

Now, the presence of Apple Inc. (NASDAQ:AAPL) as a customer would certainly be a boost for the DMS business, but the Clean Tech business has been under pressure since last year and continues to be so. A recovery can be expected going forward but it’s more of a “wildcard” as management states. Similarly, Instrumentation hasn’t done well either as industrial recovery has been soft. However, the company is seeing a recovery, although I won’t count too much on it now.

Thus, Specialized Services is carrying the weight of DMS and investors would have to wait for the other two in the segment to click.

Finally, we come to the Enterprise & Infrastructure business, which made up 31% of revenue in the previous quarter and grew 4% from last year. Jabil is expecting a consistent performance from this segment, and also expects the operating margin of the business to rise. Now, given the fact that telecom and data center spending seems to be doing pretty well this year, as evidenced by the results of other component suppliers, I would expect this side of Jabil Circuit, Inc. (NYSE:JBL)’s business to continue performing well.

Now what

Thinking on a sum-of-parts basis, I think it would make sense to keep Jabil in your portfolio as the company’s end-markets do have potential to get better. The High Velocity segment looks like a risky play and investors should keep an eye on it. DMS has done well and a recovery looks to be in motion there, while Enterprise & Infrastructure should see secular growth.

A cost-cutting program should support earnings in the long run, while a forward P/E of just 7.6 along with a dividend yield of 1.60% looks enticing. But, if you’re the conservative type and are wary of Jabil Circuit, Inc. (NYSE:JBL)’s bottom line woes, then you might consider taking some money off the table and play with the rest.

The article Should You Be Patient With This Stock? originally appeared on Fool.com.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL). Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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