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Take a pass on Celestica, says RBC Capital


CelesticaAhead of second quarter earnings from Celestica (Celestica Stock Quote, Chart, News TSX:CLS) analyst Paul Treiber of RBC Capital is sticking with his “Hold” rating on the stock.

Trieber issued an update on his coverage on Tuesday in which he set a target price of $7.50 per share, which is above analysts’ target consensus of $6.69.

Headquartered in Toronto, Celestica is an electronics manufacturing services company with an Advanced Technology Solutions (ATS) segment and Connectivity & Cloud Solutions (CCS) segment, the latter of which went through a review as part of a wider restructuring conducted by the company and featuring a disengagement from programs with Cisco Systems.

Celestica’s CCS segment saw its revenue drop last quarter due to demand softness from its communications customers, a state of affairs the company expects will continue into the second quarter, due on Wednesday July 29.

Celestica stock

For its Q1 2020, Celestica reported total revenue down eight per cent year-over-year to $1.32 billion, with a five-per-cent drop in ATS revenue and a ten per cent decrease in CCS revenue. Adjusted earnings (non-IFRS) came in at $0.16 per share compared to $0.12 per share a year earlier. (All figures in US dollars except where noted otherwise.)

At the time, management spoke of the challenge currently being faced due to the COVID-19 pandemic, which has caused a decline in demand for Celestica’s products.

“While the full impact and duration of COVID-19 is unknown at this time, we believe Celestica’s swift response, diversification, improved operating model, and solid balance sheet position us well to weather this disruption. Despite the current challenges, our long-term goal to generate sustainable profitable growth remains unchanged,” said Rob Mionis, CEO and president, in a press release.

Year-to-date, Celestica’s share price is down 13 per cent. At press time, Trieber’s $7.50 target represented a projected 12-month return of 7.6 per cent.

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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.
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