Jabil Circuit, Inc. (JBL) is a provider of worldwide electronic manufacturing services and solutions. Jabil provides electronics design, production and product management services to companies in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, solar, storage and telecommunications industries.  JBL is currently trading around $20.78 in a 52-week range of $15.30 – 24.13. The company’s stock has been outperforming the market this year with shares increasing 19.14% year to date.

The electronics manufacturer is scheduled to announce earnings today after the bell. In July, Jabil Circuit announced its Board of Directors had authorized the repurchase of up to $100 million worth of shares of the company’s common stock. CFO Alexander Forbes was quoted during the last conference call saying, “Our third fiscal quarter performed largely as planned and is highlighted by a strong balance sheet performance, driven by significant cash flow from operations and a total cash position of $1.3 billion. We believe the strength of our balance sheet positions us well as we consider strategic investments in key growth areas in fiscal 2015.” While the expectations of management might be positive, the historical data tells a slightly different story.

Historical data shows that for the past 8 earnings reports, JBL has moved an average of 7.4%, with 5 out of 8 last reports moving the stock to the downside. The near-term at-the-money straddle is implying a 8.3% move in the stock. By comparing historical data to current implied data, we can infer that implied volatility is 1% higher than the historical mean, suggesting more tension and increased interest in JBL options. Accounting for historical vs. implied data, we are neutral-to-bearish on this name.

Andrew Keene


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