Celestica: A Fast-Running IBD Stock Worth Catching

Celestica (CLS), the Toronto-based electronics contract manufacturer, has been making waves in the market with its impressive stock performance. As the IBD Stock of the Day, Celestica's shares have surged nearly 16% in a single trading session, gapping out of a consolidation pattern at a buy point of $63.49. This article explores the factors driving Celestica's strong stock performance and its potential for continued growth.


Celestica's earnings reports and outlook have significantly contributed to its stock's momentum. In its third-quarter earnings report, the company reported adjusted earnings of $1.04 per share, up 60% year-over-year, and sales of $2.5 billion, a 22% increase from the previous year. Analysts had expected earnings of $0.93 per share on sales of $2.41 billion. For the current quarter, Celestica expects to earn $1.04 per share, up 37%, on sales of $2.5 billion, up 17%. The company also provided its outlook for 2025, forecasting adjusted earnings of $4.42 per share, up 15% from its target of $3.85 for this year, and revenue climbing 8% to $10.4 billion from its 2024 target of $9.6 billion.


Celestica's strategic shift towards cloud computing and AI services has played a significant role in its earnings growth. The company's third-quarter outperformance was driven by continued strong demand in its Connectivity and Cloud Solutions group. Celestica also announced a new business relationship with artificial intelligence services firm Groq, supporting the manufacturing of servers for AI and machine learning, as well as full rack solutions.

Celestica's partnerships, such as the one with Groq, have expanded its market reach and driven sales momentum. The company's diversified customer base, spanning various industries, has contributed to its resilience and sales momentum. Celestica's cost-cutting measures and operational improvements have also impacted its profit margins and earnings growth.


Celestica's current valuation compares favorably to its industry peers and historical averages. With a market capitalization of approximately $11.5 billion, the company's price-to-earnings ratio stands at around 20.5, which is in line with its industry peers. Celestica's price-to-sales ratio is approximately 4.5, indicating that the company's valuation is relatively attractive compared to its sales growth.


While Celestica's stock performance has been impressive, investors should be aware of potential risks and challenges. The company operates in a highly competitive market, and its success depends on its ability to maintain its competitive edge and adapt to changing market conditions. Additionally, Celestica's exposure to the semiconductor industry and its reliance on a relatively small number of customers could pose risks to its financial performance.

In conclusion, Celestica's strong stock performance, driven by its earnings growth and strategic shift towards cloud computing and AI services, presents an attractive opportunity for investors. The company's partnerships, diversified customer base, and favorable valuation make it a compelling choice for those looking to catch up with a fast-running IBD stock. However, investors should be mindful of the potential risks and challenges that Celestica faces in the competitive electronics contract manufacturing industry.