Celestica: Four Reasons to Continue Buying

Celestica Inc. has reported strong Q2 FY25 results, generating rapid wealth for investors. The company's performance has been impressive, and experts are recommending continued investment in CLS stock. Four key reasons to keep buying more include the company's solid revenue growth, expanding margins, improved profitability, and strong cash flows.

Celestica Inc. (CLS) has delivered a robust performance in the second quarter of fiscal year 2025, generating impressive results that have investors bullish on the stock. The company's strong revenue growth, expanding margins, and improved profitability have all contributed to a positive outlook for the coming quarters. Here are four key reasons why investors should consider continuing their investment in CLS stock.

Solid Revenue Growth

Celestica reported Q2 FY25 revenue of $2.89 billion, surpassing analyst estimates of $2.65 billion, marking a significant 21% year-over-year increase [1]. The company's guidance for third-quarter revenue was also raised to $2.88 billion to $3.13 billion, compared to estimates of $2.77 billion. This robust revenue growth is primarily driven by strong demand from hyperscalers, particularly in the High-Performance Switching (HPS) sub-segment of the Communications business, which grew by 82% in the second quarter [2].

Expanding Margins

The company's adjusted operating margin improved to 8.3% in the second quarter, a 130 basis point increase from the previous quarter. This expansion in margins is largely attributed to the higher mix of HPS revenues and strong productivity. HPS now accounts for 43% of total company revenues and is growing at more than 80% year-over-year. As HPS growth continues to outpace overall company growth, Celestica expects its aggregate EBIT margins to remain above 8% in upcoming quarters [2].

Improved Profitability

Celestica's adjusted earnings per share (EPS) for the second quarter were $1.39, beating analyst estimates of $1.22. The company also repurchased 600,000 shares of its common stock for $40 million in the quarter, indicating a commitment to shareholder value. Additionally, the company ended the period with $313.8 million in cash and cash equivalents, providing a solid financial foundation [1].

Strong Cash Flows

Celestica's strong cash flows and balance sheet position are further evidence of its financial health. The company's cash position allows it to invest in growth opportunities, repurchase shares, and maintain a strong dividend policy. The company's guidance for 2025 revenue has been raised to $11.55 billion, up from prior guidance of $10.85 billion, and adjusted earnings are expected to be $5.50 per share, up from prior guidance of $5 per share [1].

Conclusion

Celestica Inc.'s strong Q2 FY25 results, coupled with its robust revenue growth, expanding margins, improved profitability, and strong cash flows, make a compelling case for continued investment in CLS stock. The company's bullish outlook and strong fundamentals provide a solid foundation for investors to consider.

References

[1] https://www.benzinga.com/markets/earnings/25/07/46676131/celestica-stock-surges-on-q2-earnings-beat-company-raises-2025-outlook-on-strengthening-demand

[2] https://seekingalpha.com/article/4807045-celestica-4-reasons-to-keep-buying-more