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Jabil Sees Orders Softening; Contract Mfrs Tumble

Posted by Eric Savitz

Contract manufacturing stocks were hit even harder than the broad market today, apparently pressured by comments from several industry executives yesterday at a panel discussion at the Goldman Sachs technology conference in Las Vegas.

At the panel, Jabil CEO Tim Main said that it has seen its order book softening consistently, according to a note today from RBC Capital analyst Amit Daryanani. The RBC analyst says OEMs “may be scaling back orders to position themselves if Q1 seasonality ends up being more severe than expected.”

On the call, Main likened the current downturn to the 1991/1992 recession, “kind of a gradual stall, and coming to rest…it feels to me over the last 180 days things have got progressively slower…for the most part, it appears to me that things are eroding, and getting a little bit slower. Definitely not falling off the end of the table, the bottom is not falling out of the economy at all…but out expectations, our internal forecasts…have gotten a little bit more conservative.”

Daryanani writes that “the sense we get is JBL is witnessing a rather broad based slowdown in expectations from its customers.” He says the headwinds may be more pronounced with handsets and the networking/telecom segments.

Daryanani cut his EPS estimate for Jabil for the August 2008 fiscal year to $1.20 from $1.29; he thinks the company could miss its guidance for the year of $13 billion to $13.4 billion in sales and $1.20-$1.50 a share.

I continue to own and follow this stock although I had been expecting some improvement in operating results...

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