Celestica Is Very Likely To Beat Q2 Earnings

Summary

  • Celestica's HPS sub-segment is driving structural margin expansion and higher profitability, supporting my continued bullish stance despite recent stock outperformance.
  • Consensus Q2 estimates appear conservative given Celestica's strong track record of earnings beats and ongoing share gains with hyperscalers, setting up for another positive surprise.
  • The new ES1500 networking switch provides a strong future growth narrative that should boost investor sentiment and lead to positive forward earnings revisions.
  • Valuation multiples are elevated, but I believe further EPS growth and margin expansion justify a 21% upside potential over the next 12-16 months.
  • Despite the massive run-up, the stock remains a "Buy" as its core AI-driven momentum is intact and poised to beat near-term expectations.

Entrance of Celestica Inc. in Newmarket, Ontario, Canada.

JHVEPhoto

My Thesis Update

I initiated my investment coverage of Celestica Inc. (NYSE:CLS) (TSX:CLS:CA) stock in March last year with a "Buy" rating, citing the firm's strong AI-driven business momentum amid healthy balance sheet and margin expansion opportunities

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of CLS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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