Trending >

Celestica is a pass for now, says CIBC Capital Markets

Celestica stock

celestica cibcCelestica (Celestica News, Stock Quote, Chart TSX, NYSE:CLS) has been on a downward trend for a couple of years now, but the electronics manufacturing services provider just came in with a quarter that met the consensus expectation. And as the company continues its buyback program, questions have arisen regarding whether Celestica should stay a public company.

That question, specifically, came from Todd Coupland, managing director at CIBC Capital Markets.

Celestica reported its second quarter ended June 30, 2019, on Wednesday, coming in with revenue of $1.45 billion, down from $1.70 billion a year prior but within management’s guidance of $1.4 to $1.5 billion. The company’s Q2 EPS was $0.12 per share, also down from $0.29 per share last year. (All figures in US dollars.)

Both revenue and EPS were in line with analysts’ estimates, however, a good sign for a company that is attempting to right the ship and bring up its share price. CLS is down 22 per cent year-to-date.

On the company’s earnings call on Wednesday, Coupland asked management about its share buyback program, which for Celestica, a long-ago spinoff off IBM, has been cutting down the number of outstanding shares through a multi-year strategy.

Coupland said, “You’re buying a lot of stock back. Your valuation is low here. Does the board think about whether or not it makes sense for Celestica to stay public, given all these transition points and not being terribly well-received by the overall public market?”

In reply, Celestica president and CEO Rob Mionis said, “As a leadership team and as a board, we always look for various ways to return value to our shareholders. Right now, we’re committed to our current strategy. We believe it’s sound. We believe it’s working, albeit it’s not progressing as fast as we’d like, which is being largely driven by the market headwinds we have in capital equipment and to some extent communications. We always look at a wide variety of ways to increase shareholder value.”

In late April, Coupland dropped his rating on CLS from “Outperformer” to “Neutral” while lowering his share price from $11.50 to $8.50 per share.

We Hate Paywalls Too!

At Cantech Letter we prize independent journalism like you do. And we don't care for paywalls and popups and all that noise That's why we need your support. If you value getting your daily information from the experts, won't you help us? No donation is too small.

Make a one-time or recurring donation

About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
insta twitter facebook


Leave a Reply