Celestica Inc. (CLS-T) has emerged as a standout performer on the TSX Composite this year, with a gain of 152% as of November 17, 2023. What has fueled this extraordinary growth?
In order to understand Celestica’s success, it’s important to delve into its history. The Toronto-based company, which now employs 26,000 people, was first established in 1996 as a subsidiary of IBM. It was eventually sold to Onex Corp. (ONEX-T), and in 1998, it went public with a strong start during the dot-com boom. However, the stock experienced a steep decline following the burst of the tech bubble in the early 2000s.
For years, Celestica remained in the background, overlooked by investors. However, in 2016, the company embarked on a transformation strategy aimed at diversifying its portfolio, investing in engineering offerings, and improving profitability. The goal was to become a leader in product and platform solutions across higher value markets, including defense and aerospace, healthtech, communications, industrial, and capital equipment.
One key driver behind Celestica’s recent success is its focus on artificial intelligence (AI) solutions. The company’s 800G family of network switches is designed to support cutting-edge AI, machine learning (ML), and high-performance computing requirements. This positions Celestica at the forefront of technological innovation.
The company’s efforts have paid off, with significant growth reported in recent years. In the 2022 fiscal year, Celestica achieved a 29% increase in revenue, reaching $7.3 billion, the highest in a decade. Adjusted earnings per share also reached a record high of $1.90.
The momentum has carried into 2023, with third quarter revenue up 6% compared to the same period last year. Adjusted earnings per share for the quarter were 65 US cents, an improvement from 52 US cents in the previous year.
What’s next for Celestica?
Celestica projects that its fourth quarter revenue will be between $2.0 billion and $2.15 billion, with adjusted earnings per share forecasted to be between 65 and 71 US cents. The company also plans to launch a new normal course issuer bid, allowing it to repurchase up to 10% of its public float.
Despite the recent price run-up, Celestica’s stock maintains a reasonable price-to-earnings ratio of 16.65. This, coupled with the company’s focus on long-term growth and its strong performance, makes it an attractive buy for investors looking to capitalize on the Canadian tech sector.
FAQ
1. When was Celestica Inc. established?
Celestica Inc. was established in 1996 as a subsidiary of IBM.
2. What market sectors does Celestica focus on?
Celestica focuses on higher value markets such as defense and aerospace, healthtech, communications, industrial, and capital equipment.
3. What is driving Celestica’s recent success?
Celestica’s recent success can be attributed to its focus on artificial intelligence (AI) solutions and its commitment to diversifying its portfolio and improving profitability.
4. What are Celestica’s forecasted earnings per share for the fourth quarter of 2023?
Celestica projects adjusted earnings per share to be between 65 and 71 US cents for the fourth quarter of 2023.
5. Does Celestica pay a dividend?
No, Celestica does not currently pay a dividend.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as investment advice. Please conduct your own research and consult with a financial advisor before making any investment decisions.