Celestica could deliver upside surprises in 2019, Beacon Securities says

Following the company’s third quarter results, Beacon Securities analyst Gabriel Leung has maintained his “Buy” rating on Celestica (Celestica Stock Quote, Chart TSX, NYSE:CLS).

On Wednesday, Celestica reported its third quarter 2018 results. The company posted Adjusted Earnings of $0.26 on revenue of $1.71-billion, a topline that was up 12 per cent over the same period last year.

“Celestica delivered solid revenue growth in both our ATS and CCS segments in the third quarter, as well as continued sequential expansion of our consolidated margin,” CEO Rob Mionis said. “We were particularly pleased with the performance of our CCS business, which delivered steady margin improvements each quarter this year. As we finish 2018, we are excited with the progress we are making on our strategy launched three years ago to diversify our revenue mix and deliver better overall financial performance. While we recognize there is still more work to do, we believe that our progress to date is encouraging, and positions us to enter 2019 with improving financial results, a more efficient global network, and resources that are focused on end market opportunities better aligned to our strengths and strategy.”

Leung says he thinks some of Celestica’s plans to drive margin expansion could take hold next year.

“Overall, we believe 2019 could be an interesting year as CLS’ cost initiatives play out, which could result in margin upside surprises,” the analyst says.

In a research update to clients today, Leung maintained his “Buy” rating and one-year price target of (US) $13.00 on Celestica, implying a return of 18 per cent at the time of publication.

Leung thnks CLS will generate EBITDA of (all figures USD) $286-million on revenue of $6.6-billion in fiscal 2018. He expects those numbers will improve to EBITDA of $295-million on a topline of $6.44-billion the following year.