Many investors have been watching Celestica, Inc. (CLS) recently. The electronics manufacturing services company’s shares have dropped 30.7% over the past month, compared to the Zacks S&P 500 composite’s 7.7% decline.
The Zacks Electronics—Manufacturing Services industry, which Celestica belongs to, has lost 21.9% during the same period. Evaluating changes in a company’s earnings projections is important, as the fair value of its stock is determined by the present value of its future earnings stream. When earnings estimates increase, the fair value of the stock also goes up.
The opposite happens when earnings estimates decrease. Celestica is expected to post earnings of $1.10 per share for the current quarter, indicating a 27.9% change from the year-ago quarter. The Consensus Estimate has changed -0.7% over the last 30 days.
For the current fiscal year, the consensus earnings estimate of $4.78 indicates a year-over-year change of +23.2%, with the estimate having changed +0.8% over the past 30 days. For the next fiscal year, the consensus earnings estimate of $5.93 indicates a change of +23.9% from what Celestica is expected to report this year, with the estimate having changed by +4.6% over the past month.
Celestica earnings and revenue insights
Celestica is rated Zacks Rank #2 (Buy) due to the size of the recent change in the consensus estimate, along with several other factors related to earnings estimates. While earnings growth is crucial, a company must also grow its revenues over time. The consensus sales estimate of $2.55 billion for the current quarter points to a year-over-year change of +15.3%.
The $10.77 billion and $12.72 billion estimates for the current and next fiscal years indicate changes of +11.7% and +18%, respectively. In the last reported quarter, Celestica recorded revenues of $2.55 billion, representing a year-over-year change of +18.9%. The EPS for the same period was $1.11, compared to $0.76 a year ago.
Compared to the Consensus Estimate of $2.6 billion, the reported revenues represented a surprise of -2%, while the EPS aligned with estimates. Over the last four quarters, Celestica surpassed consensus EPS estimates three times and topped consensus revenue estimates also three times. To assess whether a stock is fairly valued, overvalued, or undervalued, it is important to compare its current valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its historical values and those of its peers.
Celestica is currently graded B on the Value Style Score, indicating that it trades at a discount to its peers. With its Zacks Rank #2, Celestica is expected to outperform the broader market in the near term. The information detailed here and additional analysis may help investors determine whether paying attention to the market buzz about the company is worthwhile.
Image Credits: Photo by Andre Taissin on Unsplash
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