Jabil will soon rejoin the Standard & Poor’s (S&P) 500 Index, a significant milestone after a seven-year hiatus and a rare occurrence as company lifespans plummet.
S&P Dow Jones officials removed the St. Petersburg-based, global manufacturing solutions provider from “the world’s most popular index” in 2014. At the time, Jabil’s market capitalization – an estimate of company worth based on stock price and outstanding shares – dropped to $3.9 billion. Health Care
However, the company’s market cap is now up to $15.44 billion, with shares soaring nearly 420% in the past five years. Jabil’s leadership expects to generate $31 billion in fiscal year 2024.
“Over the past several years, we have intentionally structured the company to be more reliable throughout a range of economic cycles,” CEO Kenny Wilson said in a prepared statement. “As a result, we expect Jabil’s profitability to be more resilient despite softer demand. This provides another proof point of Jabil’s improved ability to navigate an economic downturn.”
The local conglomerate will join the S&P before markets open Dec. 18. Investopedia notes that the index is one of the most used benchmarks for determining the nation’s overall economic health.
While the Dow Jones Industrial Average serves a similar purpose, it only features 30 companies. S&P inclusion now requires a $14.5 billion market cap.
In a Dec. 11 feature, The Motley Fool called Jabil rejoining the “top shelf” S&P “a big deal.” Increased visibility and credibility typically bolster stock prices, and the publication noted that many hedge funds have specific index requirements.
Increased liquidity and higher trading volumes will likely lead to an immediate price spike. However, the author believes the relisting will have lasting positive effects on Jabil’s stock.
“The inclusion rewards Jabil for the past success of lifting its market capitalization back up to an elite level after a few disappointing years,” the publication wrote. “It just might serve as a selling point at the deal-seeking tables.”
That sentiment proved prophetic as Jabil officials announced Tuesday that the company has partnered with decision intelligence solutions provider Supplyframe. The two companies plan to leverage artificial intelligence and automation to reduce product development cycles and eradicate manual procurement processes.
According to Supplyframe’s website, the California-based company’s Design-to-Source Intelligence platform is “the world’s richest intelligence resource for the electronics industry.” Frank McKay, Jabil’s chief procurement and supply chain officer, said the joint venture would “create a more agile competitive, responsive and efficient value chain, which is crucial in today’s fast-paced market.”
How long will Jabil remain on the index?
Jabil spent 13 years on the S&P 500 until its delisting in 2014. The index is constantly evolving and undergoes about 20 changes annually.
In September, Investor’s Business Daily reported that 180 S&P 500 stocks have delisted since 2015. The publication attributed the turnover to an increasingly fast-changing economy.
Jabil, Uber Technologies and Builders FirstSource will replace Sealed Air Corp., Alaska Air Group and SolarEdge Technologies on the index Dec. 18. A recent McKinsey & Company study found that many of the nation’s most prominent companies will disappear in less than two decades.
The global management consultant firm found that in 1958, the average lifespan of companies in the S&P 500 was 61 years. It is now less than 18 years, and McKinsey researchers believe 75% will disappear by 2027.
Investopedia noted that the S&P 500 listed U.S. Steel since its inception in 1894. When what was once the world’s largest company fell below the $4 billion market cap threshold in 2013, Dow Jones officials replaced it with Martin Marietta Materials, a lesser-known construction aggregate producer.
“Only on Wall Street does the Iron Age give way to the Stone Age,” wrote the publication.
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