Celestica Value Aim Raised To (US) $225 At RBC

Shares of Celestica (Celestica Stock Quote, Chart, Data, Analysts, Financials NYSE:CLS) surged virtually 17% Tuesday (July 29) after the Toronto-based electronics producer posted sharply better-than-expected second-quarter outcomes and raised its full-year outlook.

As reported by The Globe and Mail, RBC Dominion Securities analyst Paul Treiber talked about the company’s continued sturdy improvement and bettering earnings mix help the view that Celestica’s valuation premium is extra prone to be sustained.

“With Q2 outcomes, Celestica reported its strongest beat and raise in extra than two years because of sturdy demand from hyperscalers,” Mr. Treiber talked about in a July 30 report. “Steering stays conservative, which suggests potential upside, in our view.”

Second-quarter earnings and earnings far exceeded analyst expectations, propelling Celestica’s market capitalization above CGI Inc. to show into the third-largest publicly traded tech agency in Canada. The stock has better than doubled year-to-date and is now up 18-fold as a result of the end of 2022.

Citing continued energy in high-performance networking and AI-related infrastructure demand, Celestica raised its 2025 earnings guidance to US$11.55-billion from US$10.85-billion, up 20% year-over-year. Adjusted earnings per share guidance rose to US$5.50 from US$5.00, marking a 42% improve. Every projections had been above Highway consensus, which had forecast US$10.99-billion in earnings and US$5.08 in EPS.

“Celestica has ‘extreme confidence’ in its guidance, as purchaser orders exceed guidance,” Mr. Treiber talked about. “This suggests upside might be going, in our view.”

Momentum in hyperscaler demand will also be serving to Celestica purchase market share in high-performance networking. Revenue from its largest purchaser rose 17% year-over-year in Q2, in distinction with a 1% decline in Q1. The company expects 800G shipments to account for better than half of its networking amount throughout the second half of 2025, whereas a next-generation AI/ML custom-made compute contract is predicted to drive a return to constructive improvement in its CCS Enterprise section by This autumn.

Treiber well-known the company now has “visibility to purchaser demand for the following 12 months” and expects “continued sturdy improvement through at least 1H/FY26.” Additional drivers embrace the ramp of current 1.6T change functions and a giant contract with a “digital native” purchaser, which are anticipated to help improvement through FY27. Within the meantime, administration expects its ATS enterprise to return to 10% improvement in FY26 after flat effectivity in FY25.

The analyst raised his 2026 forecasts to earnings of US$13.3-billion and adjusted EPS of US$6.35, up from US$13.1-billion and US$6.20. His 2027 estimates moreover elevated to US$15.8-billion in earnings and US$7.75 in EPS, from US$15.7-billion and US$7.58 beforehand.

“Celestica is seeing rising breadth and market share with hyperscaler prospects in every its networking and enterprise segments,” he talked about. “For example, all of Celestica’s 400G prospects have became 800G prospects. Momentum shows Celestica’s execution at scale, best-in-class designs and geographic footprint.”

Celestica’s bettering enterprise mix will also be yielding margin progress. Adjusted EBIT margin rose 110 basis components year-over-year to a doc 7.4% in Q2.

Treiber reiterated his “Outperform” rating and raised his purpose price to US$225 from US$185, successfully above the Highway widespread of US$176.61, in keeping with LSEG data. “We think about Celestica’s premium valuation is extra prone to be sustained,” he talked about.

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