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Analyst Upgrades After Earnings Lift Jabil Circuit Shares

At least two analysts upgraded Jabil Circuit on Friday, after the contract electronics manufacturer reported an adjusted fiscal third-quarter profit that topped Wall Street expectations.

Jabil on Thursday reported a sharply lower fiscal third-quarter profit, due to heavy restructuring and amortization costs. But adjusted results beat Wall Street's 21-cent per share expectation, while sales jumped 16 percent to also top analysts' estimates.

Looking ahead, Jabil said fiscal fourth-quarter earnings per share may fall below Wall Street's estimates, but the company also forecast sales above expectations.

RBC Capital Markets analyst Amit Daryanani upgraded the shares, encouraged by improvement in margins during the quarter.

"We are upgrading Jabil to 'Outperform,' given tangible signs of margin improvement as Jabil has worked through the myriad of issues that have curtailed operating margins in the past," Daryanani wrote in a client note.

Daryanani's new price target is $6 higher at $28, implying upside of nearly 34 percent from Thursday's $20.96 closing price. Daryanani previously had the shares at a "Sector Perform" rating.

Meanwhile, Credit Suisse analyst William Stein also upgraded Jabil's stock to "Outperform" from "Neutral," based on a better long-term sales and margin outlook.

Stein also said the more conservative fourth-quarter outlook sets Jabil up to meet or beat Wall Street expectations.

"Core earnings per share guidance, excluding options, came down by 4 cents to 25 cents to 31 cents, setting the bar low enough for Jabil to meet or beat guidance again," Stein wrote.

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