Contract manufacturer Jabil Circuit Inc. (JBL), Wednesday said its profit for the third quarter declined as restructuring charges and higher manufacturing costs offset revenue growth. Nonetheless, both earnings and revenues for the quarter came in ahead of Wall Street estimates.
Moving ahead, Jabil detailed a weak earnings outlook for the fourth quarter, which is indicated to miss current expectations.
Jabil said revenues for the third quarter grew 5.1 percent to $4.47 billion from $4.25 billion last year. Analysts estimated revenues of $4.40 billion for the quarter.
Nonetheless, higher manufacturing costs nearly erased the positive impact of revenue growth. Cost of revenues increased to $4.14 billion from $3.92 billion last year, which may indicate increased spending for making aluminum casings for iPhone 5 for Apple Inc. (AAPL).
Apple is one the main customers of Jabil, however Apple's control of pricing over its suppliers has shrunk Jabil's margins lately. Meanwhile, Jabil has taken steps to expand and diversify from smartphone field. Recently, Jabil agreed to buy plastic-products maker Nypro for $665 million in order to diversify into consumer electronics and health care industry too.
Chief Executive Mark Mondello said, "We are pleased with our progress on the diversification of our business and the positive benefits it affords the company. We expect this diversification to continue during our fourth fiscal quarter as we finalize our acquisition of Nypro, which is expected to close on the 1st of July."
St. Petersburg, Florida-based Jabil's third-quarter profit dropped to $50.1 million or $0.24 per share from $101.3 million or $0.48 per share last year.
Earnings, excluding special items, decreased to $0.56 per share from $0.64 per share last year. On average, 11 analysts polled by Thomson Reuters expected earnings of $0.54 per share for the quarter. Analysts' estimates typically exclude special items.
The company recorded restructuring charges of $28.4 million and a non-cash charge related to a note receivable of $25.6 million in the quarter.
Looking forward to the fourth quarter, the company expect earnings in the range of $0.04 to $0.12 per share, core earnings of $0.50 to $0.58 per share and revenues of $4.45 billion to $4.65 billion. Analysts currently estimate earnings of $0.60 per share on revenues of $4.59 billion for the quarter.
JBL closed Wednesday's trading at $19.85, down $0.07 or 0.37%, on the NYSE. The stock further slipped $0.82 or 4.14% in after-hours trade.
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