A quarter that bested his expectations has Canaccord Genuity analyst Robert Young feeling bullish about Celestica (TSX, NYSE: CLS).
Yesterday, Celstica reported its Q1, 2017 results. The company earned (U.S.) $25.6-million on a topline of $1.47-billion, a nine per cent topline bump over the same period last year.
“Celestica delivered a strong first quarter, with 9-per-cent year-over-year revenue growth and 22-per-cent growth in operating earning, compared with the first quarter of 2016,” said CEO Rob Mionis. “This marks our sixth consecutive quarter of year-over-year growth in revenue and operating earnings and our highest first quarter operating margin** performance in over 15 years as a result of our relentless focus on profitable growth.I am pleased with our strong start to the year. We are making great progress as we execute our strategy in this dynamic market environment. We are focused on driving long-term profitable growth and increasing value to our customers and shareholders.”
Young says the nine per cent topline growth Celestica delivered was better than his seven per cent expectation. The analyst is cautiously optimistic about the company’s near term future.
“The two largest markets are expected to drive growth in the near term; Communications on the back of ongoing optical strength (~1/3 of the segment) and diversified driven by demand strength in semiconductors and new programs,” he says. “While a challenging market for tech hardware and less-than-perfect visibility remain headwinds, we have improved confidence in the growth profile and see opportunities for margins to move towards the high end of the company’s repeated 3.5-4.0% OM target range. We could see growth and margin expansion accelerated by a more aggressive stance on M&A targeted on higher-margin diversified opportunities.”
In a research update to clients today, Young maintained his “Buy” rating and one-year price target of (U.S.) $16.25 on Celestica.
Young thinks Celestica will generate EBITDA of (All figure U.S.) $305-million on revenue of $6.25-billion in fiscal 2017. He expects these numbers will improve to EBITDA of $319.7-million on a topline of $6.54-billion the following year.