Celestica, Inc. CLS is scheduled to report first-quarter 2025 earnings on April 24. The Zacks Consensus Estimate for sales and earnings is pegged at $2.55 billion and $1.10 per share, respectively. Earnings estimates for CLS have moved up from $4.75 per share to $4.78 for 2025 and from $5.67 per share to $5.93 for 2026, over the past 60 days.

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 most occasions. It delivered a four-quarter earnings surprise of 10.3%, on average, matching estimates in the last reported quarter. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

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Earnings Whispers

Our proven model does not predict an earnings beat for Celestica for the first 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

Celestica is witnessing healthy traction in the Connectivity & Cloud Solutions segment. Strong demand for AI/ML compute products is expected to have driven revenues in the enterprise-end market in the quarter. Healthy demand for networking products, including 400G switches and 800G switches, is likely to have propelled net sales growth in the communications end market.

However, the Advanced Technology Solutions segment is expected to have been plagued by weakness in the Industrial end market. Strength in commercial aviation and several defense customer wins in the aerospace & defense end market might have partially cushioned 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 95.6% compared with the industry’s growth of 31.5%. It has also outperformed its peers like Flex Ltd. FLEX and Jabil Inc. JBL over this period. Flex has gained 14.2% and Jabil is up 13.4% over this period. With a presence across 100 locations in 30 countries, Jabil is riding on secular growth drivers with strong margin and cash flow dynamics. On the other hand, Flex is thriving on low-cost manufacturing.

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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 16.38 forward earnings, higher than 14.72 for the industry and the stock’s mean of 8.4. 

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Investment Considerations

Celestica's extensive portfolio 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 drives growth. The rapid adoption of AI, data centers by enterprises across industries presents solid growth potential for Celestica. Focus on production efficiency and effective working capital management boost profitability and free cash flow. Healthy momentum in several end markets, including enterprise, communication, aerospace and defense, augurs well for the company ahead of first-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. 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 improving earnings estimates, the stock is witnessing a positive investor perception. Riding on 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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This article originally published on Zacks Investment Research (zacks.com).

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