Jabil Inc.

S&P Global Ratings' stable outlook on St. Petersburg, Fla.-based outsourced manufacturing company Jabil Inc. reflects our expectation that the company's focus on growth in higher-margin manufacturing businesses will enable it to achieve good revenue and EBITDA growth over the next 12 to 24 months, despite the potential for some volatility because of macroeconomic and trade uncertainties and large customer programs. In addition, the rating incorporates our expectation that Jabil can manage acquisitions and shareholder returns while maintaining leverage below 3x. We could lower our ratings if adjusted leverage exceeds 3x on a sustained basis. In our view, this condition would most likely be the result of pressures from a macroeconomic slowdown or disruptions from trade actions, worse-than-expected profits from Apple

...The company has high concentration with Apple but we expect the relationship to remain productive since Jabil is an important supplier. Apple represented 28% of fiscal 2018 (ending in August) revenues and it has caused volatility in operating performance in the past, but performance has been good over the past four years. We estimate revenue from Apple grew in the 30% to 40% range in 2018, much higher than the mid-teens growth for Apple itself, we think because it expanded in non-phone categories. We think Jabil can manage macroeconomic and trade risk at the '###-' rating. In our view, the company's current leverage of 2.4x provides adequate cushion to our downside threshold of 3x to absorb a meaningful macroeconomic slowdown, even if revenue growth is temporarily negative. We also think the impact from current U.S. tariff policies targeting Chinese exports, representing nearly half of U.S.-Chinese imports, will likely be modest given that technology products are underweight in the mix...

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