Celestica, Inc. CLS is scheduled to report fourth-quarter 2024 earnings on Jan. 29. The Zacks Consensus Estimate for sales and earnings is pegged at $2.49 billion and $1.04 per share, respectively. Earnings estimates for CLS have remained steady at $3.85 per share for 2024 over the past 30 days but declined from $4.44 per share to $4.41 for 2025.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

CLS Estimate Trend

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Earnings Surprise History

The leading electronics manufacturing services firm has had a solid earnings surprise history in the trailing four quarters, exceeding earnings expectations on each occasion. It delivered a four-quarter earnings surprise of 13.2%, on average. In the last reported quarter, the company pulled off an earnings beat of 10.6%.

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Earnings Whispers

Our proven model does not predict an earnings beat for Celestica for the fourth 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. That 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 launched DS4100 – a 1U 800G per port top-of-rack, leaf/spine switch – to cater to the high-bandwidth demands of data center networking across the enterprise, service provider and cloud provider domains. The latest addition to the Hardware Platform Solutions portfolio will help Celestica offer a comprehensive 800G data center switch lineup for demanding applications like artificial intelligence/machine learning (AI/ML) with the redundancy and flexibility required of modern data centers. 

Designed with Broadcom Inc. AVGO TH4-12.8T switch chipset, the DS4100 features 16x 800G OSFP ports, delivering 12.8Tbps non-blocking switching capacity in a compact 1U form factor with field-replaceable fans and redundant hot-swappable power supplies. In addition, it is powered by an x86-based CPU, delivering high performance to address a variety of critical data center applications. This is likely to have a favorable impact on the upcoming results.

The company is witnessing healthy traction in the Connectivity & Cloud Solutions segment. Strong demand for AI/ML compute products is expected to drive revenue in the enterprise-end market. Healthy demand for networking products, including 400G switches and 800G switches, will likely propel net sales growth in the communications end market.

However, the Advanced Technology Solutions segment is expected to be plagued by weakness in the Industrial end market. Strength in commercial aviation and several defense customer wins in the aerospace & defense end market are expected to partially cushion net sales in this segment. Signs of recovery in the wafer fabrication equipment market are a tailwind for the capital equipment vertical.

Price Performance

Over the past year, CLS has surged 273.9% compared with the industry’s growth of 77.9%. It has also outperformed its peers like Flex Ltd. FLEX and Jabil Inc. JBL over this period.

One-Year CLS Stock Performance

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Key Valuation Metric

From a valuation standpoint, Celestica appears to be trading at a premium relative to the industry and is trading well above its mean. Going by the price/earnings ratio, the company shares currently trade at 27.58 forward earnings, higher than 20.54 for the industry and the stock’s mean of 8.23.

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Investment Considerations

Celestica's extensive portfolio depth supports various customer requirements from low-volume, high-complexity custom products to high-volume commodity products. The company’s strong emphasis on innovation, product diversification and AI advancements are key growth drivers. The rapid adoption of AI, data centers by enterprises across industries presents a solid growth potential for Celestica. Focus on production efficiency and effective working capital management is boosting profitability and free cash flow. Healthy momentum in several end markets, including enterprise, communication, aerospace and defense, augurs well for the company ahead of fourth-quarter results. 

However, Celestica is experiencing demand softness in the Industrial end market owing to macroeconomic challenges and excess channel inventory. The company relies on raw material supplies from certain areas of Eastern Europe and the Middle East. The ongoing conflicts in those regions remain a major concern for its supply chain. In addition, growing geopolitical tension between China and Taiwan can adversely impact its business in Asia.

End Note

Celestica seems to be treading in the middle of the road, and investors could be better off if they trade with caution. With declining earnings estimates, the stock is witnessing a negative investor perception. Moreover, CLS is trading at premium valuation metrics, and new investors could wait for a better entry point to cash in on its long-term fundamentals. 

However, a single quarter’s results are not so important for long-term stakeholders and investors already owning the stock could stay put. With a diverse portfolio of products that form an integral part of AI applications, Celestica’s remarkable transformation in recent years offers a competitive edge across the broader technology market. The company is well poised for sustained growth over the years, backed by its robust infrastructure investments, solid technology know-how and wide industry experience.

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