We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Celestica (CLS) Stock a Smart Buy Ahead of Q2 Earnings?
Read MoreHide Full Article
Celestica, Inc. (CLS - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 24. For the second quarter, the Zacks Consensus Estimate for revenues is pegged at $2.25 billion, which implies growth of 15.78% from the year-ago quarter’s reported number. The Zacks Consensus Estimate for second-quarter earnings is pegged at 81 cents per share, suggesting a rise of 47.27% year over year. Earnings estimates for CLS have improved to $3.32 per share from $2.91 per share for 2024 and to $3.64 per share from $3.25 per share for 2025 over the past 90 days.
Image Source: Zacks Investment Research
Earnings Surprise History
The leading electronics manufacturing services company delivered a four-quarter earnings surprise of 13.09%, beating estimates on each occasion. In the last reported quarter, the company delivered an earnings surprise of 19.44%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Celestica for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
During the quarter, Celestica inked a definitive agreement to acquire NCS Global Services LLC, a prominent IT infrastructure and asset manager business in the United States for $36 million. The buyout is set to bolster the capabilities of CCS (Connectivity and Cloud Solutions) segment’s service offerings and expand its geographical footprint.
In the reported quarter, the company introduced a series of enterprise access networking switches called ES1000, ES1010, ES1050 and EG1050. All the newly launched Ethernet switches are compact, secure, scalable and support a range of memory and processor options. The innovative features make the solutions ideal for the dynamic performance and connectivity demands of advanced data center environments. These are likely to have translated into incremental revenues.
The company is witnessing solid momentum in the CCS segment, driven by healthy demand for AI/ML Compute and Networking products. The company’s 800G platform, crucial for supporting high bandwidth intensive AI applications in data centers, is increasingly gaining market traction. Demand for 400G switches also remains strong.
However, the ATS (Advanced Technology Solutions) segment is experiencing headwinds in the industrial business, primarily due to a slowdown in the electric vehicle market. Nonetheless, strong demand in the commercial aerospace portfolio is expected to partially reverse these negative trends.
In addition, despite solid traction for AI-powered products, stiff competition from Flex Ltd. (FLEX - Free Report) and Jabil Inc. (JBL - Free Report) is putting pressure on margins.
Price Performance
Over the past year, CLS has gained 250.9% compared with the industry’s growth of 25.3%. It has also outperformed its peers like Flex and Jabil over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Celestica appears to be trading at a premium relative to the industry and trading well above its mean. Going by the price/earnings ratio, the company’s shares currently trade at 16.12 forward earnings, higher than 14.38 for the industry and the stock’s mean 7.35.
Image Source: Zacks Investment Research
Investment Considerations
With a comprehensive and diversified product portfolio, Celestica has been capitalizing on the growing proliferation of AI-based applications and generative AI tools across industries. The company's strong focus on innovation, diversification of its product and customer mix and well-established business relationships with leading manufacturers has improved its growth potential. Robust demand in multiple end markets, including communications, enterprise, hardware platform solutions, aerospace & defense, bodes well for the company ahead of second-quarter earnings.
However, the company derives the lion’s share of its revenues from Asia. Growing geopolitical unrest in the Middle East and rising tensions between China and Taiwan could impact its operations. Fierce competition from major players in the electronic manufacturing services industry continues to weigh on margins. Its frequent acquisition strategy has escalated integration risks.
End Note
With a Zacks Rank #3, Celestica appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. The company is currently trading at premium valuation metrics, and investors should consider waiting for a more favorable entry point to capitalize on its strong long-term fundamentals.
However, the results of a single quarter are not so vital for long-term stakeholders. Investors who already own the stock may consider holding on to it, as favorable secular trends across its portfolio and an increasing generative AI boom augur well for long-term growth.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is Celestica (CLS) Stock a Smart Buy Ahead of Q2 Earnings?
Celestica, Inc. (CLS - Free Report) is scheduled to report second-quarter 2024 earnings on Jul 24. For the second quarter, the Zacks Consensus Estimate for revenues is pegged at $2.25 billion, which implies growth of 15.78% from the year-ago quarter’s reported number. The Zacks Consensus Estimate for second-quarter earnings is pegged at 81 cents per share, suggesting a rise of 47.27% year over year. Earnings estimates for CLS have improved to $3.32 per share from $2.91 per share for 2024 and to $3.64 per share from $3.25 per share for 2025 over the past 90 days.
Image Source: Zacks Investment Research
Earnings Surprise History
The leading electronics manufacturing services company delivered a four-quarter earnings surprise of 13.09%, beating estimates on each occasion. In the last reported quarter, the company delivered an earnings surprise of 19.44%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Celestica for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Celestica currently has an ESP of 0.00% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
During the quarter, Celestica inked a definitive agreement to acquire NCS Global Services LLC, a prominent IT infrastructure and asset manager business in the United States for $36 million. The buyout is set to bolster the capabilities of CCS (Connectivity and Cloud Solutions) segment’s service offerings and expand its geographical footprint.
In the reported quarter, the company introduced a series of enterprise access networking switches called ES1000, ES1010, ES1050 and EG1050. All the newly launched Ethernet switches are compact, secure, scalable and support a range of memory and processor options. The innovative features make the solutions ideal for the dynamic performance and connectivity demands of advanced data center environments. These are likely to have translated into incremental revenues.
The company is witnessing solid momentum in the CCS segment, driven by healthy demand for AI/ML Compute and Networking products. The company’s 800G platform, crucial for supporting high bandwidth intensive AI applications in data centers, is increasingly gaining market traction. Demand for 400G switches also remains strong.
However, the ATS (Advanced Technology Solutions) segment is experiencing headwinds in the industrial business, primarily due to a slowdown in the electric vehicle market. Nonetheless, strong demand in the commercial aerospace portfolio is expected to partially reverse these negative trends.
In addition, despite solid traction for AI-powered products, stiff competition from Flex Ltd. (FLEX - Free Report) and Jabil Inc. (JBL - Free Report) is putting pressure on margins.
Price Performance
Over the past year, CLS has gained 250.9% compared with the industry’s growth of 25.3%. It has also outperformed its peers like Flex and Jabil over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, Celestica appears to be trading at a premium relative to the industry and trading well above its mean. Going by the price/earnings ratio, the company’s shares currently trade at 16.12 forward earnings, higher than 14.38 for the industry and the stock’s mean 7.35.
Image Source: Zacks Investment Research
Investment Considerations
With a comprehensive and diversified product portfolio, Celestica has been capitalizing on the growing proliferation of AI-based applications and generative AI tools across industries. The company's strong focus on innovation, diversification of its product and customer mix and well-established business relationships with leading manufacturers has improved its growth potential. Robust demand in multiple end markets, including communications, enterprise, hardware platform solutions, aerospace & defense, bodes well for the company ahead of second-quarter earnings.
However, the company derives the lion’s share of its revenues from Asia. Growing geopolitical unrest in the Middle East and rising tensions between China and Taiwan could impact its operations. Fierce competition from major players in the electronic manufacturing services industry continues to weigh on margins. Its frequent acquisition strategy has escalated integration risks.
End Note
With a Zacks Rank #3, Celestica appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. The company is currently trading at premium valuation metrics, and investors should consider waiting for a more favorable entry point to capitalize on its strong long-term fundamentals.
However, the results of a single quarter are not so vital for long-term stakeholders. Investors who already own the stock may consider holding on to it, as favorable secular trends across its portfolio and an increasing generative AI boom augur well for long-term growth.