On Monday, BMO Capital Markets adjusted its outlook on Celestica Inc . (NYSE:CLS:CN) (NYSE: CLS), a global provider of design, manufacturing, and supply chain solutions, by increasing the price target to Cdn$63.00 from the previous Cdn$53.00. The firm maintained its Outperform rating on the company's shares.
The revised price target comes after recent investor meetings with Celestica's management, where the company's position in the market was discussed. BMO Capital highlighted Celestica's advantageous position to capitalize on AI-driven hyperscaler capital expenditures, especially given the current acceleration in Communications demand.
The firm also expressed a positive view on the stock's valuation, considering it attractive in relation to Celestica's end-market exposure. BMO Capital's stance is backed by the belief that the consensus FY2025 estimates, as well as their own forecasts which predict 9-10% adjusted EPS growth, may be understated. This is due to strong end-market demand and the potential for further margin expansion.
Celestica's focus on AI-driven hyperscaler capex is a key factor behind BMO Capital's confidence in the company's future performance. With Communications demand on the rise, the firm anticipates that Celestica will continue to experience growth and benefit from the industry's momentum.
The raised price target reflects an optimism in Celestica's strategic positioning and its ability to outperform in its market segment. BMO Capital's analysis suggests that the company is set to exceed market expectations and deliver robust financial results in the coming years.
In other recent news, Celestica Inc. has been the subject of several important developments. The company reported strong Q1 2024 performance, with revenues hitting $2.21 billion and an adjusted earnings per share (EPS) of $0.86, driven primarily by the strength of the Capital Equipment Solutions (CCS) segment and demand from hyperscale customers. This robust performance led Celestica to raise its full-year outlook, now expecting a 14% increase in revenue to $9.1 billion and a 36% rise in adjusted EPS to $3.30 for 2024.
Analysts have also weighed in on Celestica's performance. Stifel increased its price target for Celestica shares to $51.00, citing the company's strong positioning in data-center computing and broader industrial markets. However, they maintained a Hold rating on the stock. Meanwhile, a CIBC analyst downgraded Celestica from Outperformer to Neutral, despite raising the stock price target to $49. This was due to concerns over a potential slowdown in the company's Enterprise segment.
InvestingPro Insights
In light of BMO Capital Markets' updated outlook on Celestica Inc., recent data from InvestingPro provides additional context to the company's financial health and market performance. Celestica's management has been proactive in repurchasing shares, indicating confidence in the company's value. This aligns with a notable uptick in the stock's price over the last six months, as seen by the 88.98% price total return in that period. The company's P/E ratio stands at a reasonable 20.64, suggesting it is trading at a low valuation relative to its near-term earnings growth.
InvestingPro Tips reveal that Celestica is a prominent player in the Electronic Equipment, Instruments & Components industry and has demonstrated a strong return over the last three months, with a 26.7% price total return. Analysts predict profitability for the company this year, which is corroborated by a profitable performance over the last twelve months. With a market cap of $6.62 billion USD and revenue growth of 10.79% in the last twelve months as of Q1 2024, Celestica appears well-positioned to capitalize on the growing demand in its market segments.
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