Celestica (CLS) AI Stock Analysis

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Celestica

(TSX:CLS)

68Neutral

Celestica's overall score reflects its strong financial performance and optimistic earnings outlook, despite challenges in technical indicators suggesting bearish trends. The fair valuation indicates it's reasonably priced, but not particularly undervalued. Positive earnings projections and strategic wins provide a solid foundation for future growth.

Positive Factors

AI Investments

Celestica's strong relationships with major hyperscalers position it to benefit from tailwinds relative to AI infrastructure investments and drive strong revenue growth.

Financial Performance

Revenue and adjusted EPS exceeded expectations, indicating strong financial performance.

Market Position

New wins in AI servers and switching with major hyperscalers highlight CLS's strong market position.

Negative Factors

ATS Revenue

ATS revenue experienced a decline, driven by industrial sector softness.

Stock Valuation

Shares are trading at a high valuation compared to historical averages, indicating limited upside potential.

Technology Transition

The technology transition in an AI/ML compute program with its largest customer remains on track but is expected to continue to be a year-over-year headwind through the first half of the year.

Celestica (CLS) vs. S&P 500 (SPY)

Market Cap

$10.91B

Dividend YieldN/A

Average Volume (3M)1.33M

Price to Earnings (P/E)20.1

Beta (1Y)1.82

Revenue Growth23.03%

EPS Growth81.01%

CountryCA

Employees21,914

SectorTechnology

Sector Strength40

IndustryHardware, Equipment & Parts

Share Statistics

EPS (TTM)4.99

Shares Outstanding115,959,120

10 Day Avg. Volume946,413

30 Day Avg. Volume1,334,639

Financial Highlights & Ratios

PEG Ratio0.25

Price to Book (P/B)N/A

Price to Sales (P/S)1.17

Price to Cash Flow (P/CF)37.80

P/FCF Ratio101.30

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$209.67

Price Target Upside109.29% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering8

Celestica Business Overview & Revenue Model

Company DescriptionCelestica Inc. (CLS) is a global leader in the design, manufacturing, and supply chain solutions for a wide range of industries. The company operates across several sectors including aerospace and defense, communications, enterprise, healthtech, industrial, and capital equipment. Celestica leverages its advanced technology and engineering expertise to deliver innovative solutions that enhance the performance and efficiency of its clients' products and services.

How the Company Makes MoneyCelestica makes money primarily through its comprehensive suite of services spanning product design, engineering, manufacturing, and after-market solutions. The company's revenue streams include the sale of manufactured components and systems, design and engineering services, and supply chain management solutions. It partners with leading companies to provide customized solutions that align with their strategic goals, often entering into long-term agreements that ensure a consistent revenue flow. Additionally, Celestica's global footprint and ability to serve various high-growth industries contribute significantly to its earnings.

Celestica Financial Statement Overview

Summary

Celestica has shown strong financial performance with a 21.2% revenue growth and improvements in profitability and operational efficiency. The balance sheet is stable with moderate leverage, and cash flow generation is robust, supporting future growth.

Income Statement

Very Positive

Celestica has demonstrated strong revenue growth with a 21.2% increase from 2023 to 2024. The gross profit margin improved to 10.7%, and the net profit margin increased to 4.4%, indicating enhanced profitability. EBIT and EBITDA margins also improved, reflecting operational efficiency enhancements. The consistent upward trajectory in earnings highlights robust overall performance.

Balance Sheet

Positive

The company's debt-to-equity ratio is moderate, reflecting a balanced approach to leverage. Return on equity improved to 22.6%, demonstrating effective utilization of equity to generate profits. The equity ratio stands at 31.7%, indicating a healthy proportion of assets financed by shareholders' equity. The balance sheet reflects stability with a prudent capital structure.

Cash Flow

Positive

Celestica's free cash flow remained stable with a slight decrease, but operating cash flow showed strength with a 10.3% increase from 2023 to 2024. The operating cash flow to net income ratio is robust, indicating effective conversion of earnings into cash. The cash flow statement reflects solid cash generation capabilities, supporting future growth initiatives.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
9.65B	7.96B	7.25B	5.63B	5.75B
	Gross Profit
1.03B	778.50M	636.30M	487.00M	437.60M
	EBIT
599.30M	383.20M	263.30M	167.70M	127.90M
	EBITDA
736.20M	515.70M	408.10M	294.00M	252.60M
	Net Income Common Stockholders
428.00M	244.60M	145.50M	103.90M	60.60M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
423.30M	372.60M	374.50M	394.00M	463.80M
	Total Assets
5.99B	5.89B	5.63B	4.67B	3.66B
	Total Debt
796.70M	782.80M	786.10M	794.40M	585.90M
	Net Debt
373.40M	412.40M	411.60M	400.40M	122.10M
	Total Liabilities
4.09B	4.12B	3.95B	3.20B	2.26B
	Stockholders Equity
1.90B	1.77B	1.68B	1.46B	1.41B
Cash Flow		Free Cash Flow
303.00M	304.60M	188.90M	174.60M	186.80M
	Operating Cash Flow
473.90M	429.70M	297.90M	226.80M	239.60M
	Investing Cash Flow
-212.50M	-122.40M	-108.90M	-364.30M	-51.00M
	Financing Cash Flow
-208.50M	-311.40M	-208.50M	67.70M	-204.30M

Celestica Technical Analysis

Technical Analysis Sentiment

Negative

Last Price100.18

Price Trends

50DMA

146.71

Negative

100DMA

141.79

Negative

200DMA

109.34

Negative

Market Momentum

MACD

-8.08

Positive

RSI

35.26

Neutral

STOCH

10.38

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CLS, the sentiment is Negative. The current price of 100.18 is below the 20-day moving average (MA) of 122.77, below the 50-day MA of 146.71, and below the 200-day MA of 109.34, indicating a bearish trend. The MACD of -8.08 indicates Positive momentum. The RSI at 35.26 is Neutral, neither overbought nor oversold. The STOCH value of 10.38 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:CLS.

Celestica Risk Analysis

Celestica disclosed 62 risk factors in its most recent earnings report. Celestica reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Celestica Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ENGH	76 Outperform	C$1.28B	15.08	14.76%	4.76%	8.11%	15.83%
MDA	75 Outperform	C$2.93B	36.23	7.09%	―	33.74%	61.09%
ET	73 Outperform	C$735.87M	12.25	22.71%	8.15%	-4.64%	-19.57%
CLS	68 Neutral	$10.91B	20.07	23.36%	―	23.03%	81.01%
KXS	68 Neutral	C$4.45B	157.81	-0.10%	―	14.85%	-105.25%
Sector *	57 Neutral	$18.45B	9.41	-13.97%	2.74%	5.04%	-23.56%
BB	54 Neutral	$2.55B	―	-7.59%	―	-31.15%	30.02%

* Technology Sector Average

Performance Comparison

TSE:CLS

Celestica

98.05

34.21

53.59%

TSE:BB

BlackBerry

4.09

-0.11

-2.62%

TSE:ENGH

Enghouse Systems

23.08

-5.86

-20.25%

TSE:KXS

Kinaxis Inc

160.54

7.44

4.86%

TSE:ET

Evertz Technologies

9.67

-3.55

-26.85%

TSE:MDA

MDA Ltd

23.46

9.13

63.71%

Celestica Earnings Call Summary

Earnings Call Date: Jan 29, 2025 | % Change Since: -30.91% | Next Earnings Date: Apr 24, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong financial performance in Q4 2024 and for the full year, driven by growth in the CCS segment and significant customer wins. Despite challenges in the enterprise market and flat ATS segment revenue, the outlook for 2025 is positive with increased revenue and EPS projections.

Highlights

Strong Q4 2024 Performance

Celestica delivered strong performance in Q4 2024 with revenues of $2.55 billion, which was at the high-end of the guidance range, and an adjusted EPS of $1.11, exceeding the high-end of the guidance range. Adjusted operating margin was 6.8%.

Record Full-Year 2024 Results

For the full year 2024, Celestica achieved $9.65 billion in revenues and adjusted EPS of $3.88, representing growth of 21% and 58% respectively, along with a 100 basis point improvement in adjusted operating margin.

CCS Segment Growth

The CCS segment saw a strong growth of 30% year-over-year in Q4 2024, driven by significant demand from Hyperscaler customers and a 64% increase in communications end market revenue.

Improved Financial Metrics

Adjusted gross margin for Q4 2024 was 11.0%, up 50 basis points. Adjusted ROIC improved by 550 basis points to 29.1%. Free cash flow for 2024 was $306 million, above the most recent annual outlook of $275 million.

New Customer Wins

Celestica secured significant new wins, including a second 1.6T switching program with a large Hyperscaler customer and a new HPS win with a leading digital native company.

Lowlights

Enterprise Market Decline

Revenue in the enterprise end market was lower by 10% due to the anticipated technology transition in an AI/ML compute program with one of Celestica’s Hyperscaler customers.

Flat ATS Segment Revenue

ATS segment revenue was approximately flat at $806 million, as lower revenues in the industrial business were offset by capital equipment and aerospace and defense.

Company Guidance

During Celestica's Q4 2024 earnings call, guidance was provided for Q1 2025, with projected revenue between $2.475 billion and $2.625 billion, representing a 15% growth at the midpoint. Adjusted earnings per share (EPS) are expected to be between $1.06 and $1.16, reflecting a 34% increase at the midpoint. The non-GAAP operating margin is anticipated to be 6.8%, marking a 90 basis point improvement year-over-year. The adjusted effective tax rate for Q1 2025 is projected to be approximately 20%. For 2025, Celestica raised its full-year revenue outlook to $10.7 billion, up from a previous forecast of $10.4 billion, translating to an 11% growth. Adjusted EPS is expected to reach $4.75, representing a 22% increase, with a non-GAAP operating margin of 6.9%. The company also increased its free cash flow outlook to $350 million, highlighting robust earnings conversion and continued growth investment.

Celestica Corporate Events

Shareholder Meetings

Celestica Sets Date for Shareholders Meeting and Adopts New By-Law

Neutral

Jan 30, 2025

Celestica has announced its Annual and Special Meeting of Shareholders will take place on June 17, 2025, using a hybrid format. The company also introduced a new Advance Notice By-Law for director nominations, which must be confirmed by shareholders to remain effective after the meeting, providing a structured framework for board elections.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.