Celestica Inc. CLS recorded relatively modest fourth-quarter 2024 results, wherein adjusted earnings matched the Zacks Consensus Estimate while revenues missed the same. 

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The Toronto-based electronics manufacturing service provider reported revenue growth year over year, backed by stronger-than-expected growth in the Connectivity & Cloud Solutions (CCS) segment. Management’s strong emphasis on innovation, product diversification and AI advancements are key growth drivers. Strong growth in adjusted free cash flow is a tailwind. 

Net Income

Quarterly net earnings were $151.7 million or $1.29 per share, up from $91.6 million or 77 cents per share in the year-ago quarter. Growth in GAAP earnings was primarily attributed to top-line expansion.

Non-GAAP net earnings improved to $130.2 million or $1.11 per share from $92.1 million or 77 cents per share in the year-ago quarter. The bottom line aligned with the Zacks Consensus Estimate.

For 2024, GAAP net income was $428 million or $3.61 per share compared with a net income of $244.4 million or $2.03 per share in 2023. Non-GAAP net income for 2024 was $460.8 million or $3.88 per share compared with a net income of $295.8 million or $2.46 per share in 2023.

Revenue

Quarterly revenues were $2.55 billion, up 19% from $2.14 billion in the year-ago quarter. The healthy demand in the CCS segment cushioned the top line. However, revenues missed the Zacks Consensus Estimate of $2.6 billion. 

For 2024, revenues improved to $9.65 billion from $7.96 billion in 2023.

Quarterly Segment Results

CCS: Total revenues in this segment improved to $1.74 billion from the year-ago quarter’s figure of $1.34 billion. The 30% increase was primarily driven by strong demand in the communication end market. The segment accounted for 68% of the company’s total revenues in the fourth quarter.

Revenues in the Enterprise end market declined 10% year over year in the fourth quarter. 

The Communications end market reported revenue growth of 64%, with solid growth in the hardware platform solutions portfolio backed by hyperscaler customer demand for networking products, including 400G switches and 800G switches.

The segment’s operating income increased to $136.6 million with a margin of 7.9%, driven by greater operating leverage and improved mix.

Advanced Technology Solutions (ATS): This segment’s revenues remained relatively flat at $805.8 million, accounting for 32% of total revenues in the fourth quarter. 

The segment’s operating income decreased to $37 million from $37.7 million with a margin of 4.6% (down from 4.7%) due to lower operating leverage in the industrial end market, partially offset by an improvement in capital equipment and Aerospace and Defense business.

Cash Flow & Liquidity

In the fourth quarter, Celestica generated an operating cash flow of $143.4 million compared with $118 million in the year-ago quarter. Adjusted free cash flow was $95.8 million in the fourth quarter compared with $86.1 million in the prior-year period.

As of Dec. 31, 2024, the company had $423.3 million in cash and cash equivalents with a long-term debt of $770.2 million compared with $370.4 million and $648.3 million in the year-ago period.

Guidance Up

For the first quarter of 2025, Celestica expects revenues in the range of $2.475-$2.625 billion. Non-GAAP earnings per share are expected to be in the range of $1.06-$1.16. Management expects the non-GAAP operating margin to be 6.8%.

For 2025, the company anticipates revenues of $10.7 billion, up from the previous projection of $10.4 billion. Non-GAAP operating margin is expected to be 6.9%, up from the previous outlook of 6.7%. Non-GAAP adjusted earnings are expected to be $4.75 per share, up from the previous outlook of $4.42 per share. Adjusted free cash flow is expected to be $350 million, up from the previous outlook of $325 million. Non-GAAP adjusted effective tax rate is forecasted to be approximately 19%.

CLS’ Zacks Rank

Celestica currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Zillow Group, Inc. ZG is scheduled to release fourth-quarter earnings on Feb. 11. The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, indicating growth of 50% from the year-ago figure. 

Pinterest, Inc. PINS is scheduled to release fourth-quarter 2024 earnings on Feb. 6. The Zacks Consensus Estimate for earnings is pegged at 63 cents per share, indicating growth of 18.9% from the year-ago figure. 

Light and Wonder LNW is scheduled to release fourth-quarter earnings on Feb. 25. The Zacks Consensus Estimate for earnings is pegged at $1.08 per share, indicating growth of 47.95% from the year-ago figure.

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