Celestica earns target raise from RBC

Another beat on quarterly revenue is a good sign from Celestica (Celestica Stock Quote, Charts, News, Analysts, Financials NYSE:CLS), according to RBC Dominion Securities analyst Paul Treiber who recently reiterated a “Sector Perform” rating on the stock while raising his target price from $11.00 to $12.00, citing solid near-term indicators as a sign of improvement. 

Hardware manufacturer and supply chain solutions business Celestica reported its third quarter 2022 financials on October 24, coming in with revenue up 31 per cent year-over-year to $1.92 billion and adjusted EPS of $0.52 per share compared to $0.35 per share a year earlier. The company posted cash from operations of $74.4 million, up from $55.7 million a year ago, while Celestica also repurchased 0.5 million shares under an NCIB over the Q3. (All figures in US dollars.)

“We continue to execute on our strategy to drive profitable growth, and we are pleased with our solid financial results and the momentum that has been building,” said President and CEO Rob Mionis in a press release. “Year to date, our revenues are up 26 per cent and our non-IFRS adjusted EPS is up 56 per cent compared to the prior year period.”

“The strong performance in recent quarters continues to be driven by new project ramps in our ATS segment and strong demand with market share gains in our Hardware Platform Solutions business. Based on our strong momentum, we are raising our revenue and non-IFRS adjusted EPS outlook for 2022, and expect revenue and non-IFRS adjusted EPS growth in 2023,” he said.

Looking at the numbers, Treiber said Celestica’s transition to more resilient end markets is now benefitting the company, while an improved supply environment is also supporting growth. Treiber said the Q3 topline of $1.92 billion was the fourth consecutive result that came in ahead of consensus estimates. 

Further, Treiber liked management’s guidance, which calls for Q4 revenue of between $1.875 and $2.025 billion and EPS of $0.49-$0.55 per share and was above consensus expectations. Also a surprise to the upside was the 2023 guidance at revenue and EPS midpoints of $7.5 billion and $2.00 per share, respectively, compared to the consensus forecast at $7.2 billion and $1.85 per share, respectively.

“Stronger than expected guidance reflects: 1) Celestica’s focus on more resilient/high demand segments in capital equipment; 2) expected continued recovery in A&D and industrial (e.g., PCI revenue likely up another $100-million vs. $300-million pre-acquisition run-rate); and 3) demand resiliency at hyperscalers,” Treiber said in his report.