Celestica Jumps 67.9% Year to Date: Is the Stock Still a Buy?

Celestica, Inc. CLS has surged 67.9% in the year-to-date period compared with the  Electronics - Manufacturing Services industry’s growth of 44.7%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.Image Source: Zacks Investment ResearchThe company has outperformed its peers like Jabil, Inc. JBL and Sanmina Corporation SANM. Shares of Jabil have surged 54.2% while Sanmina increased 33.8%.CLS Rides on Product Innovation, Strong LiquidityCelestica’s strong research and development foundations allow it to produce high-volume electronic products and highly complex technology infrastructure products for a wide range of industries. The company continuously improves its manufacturing, engineering, design, quality and supply-chain capabilities while developing trusted relationships with several industry leaders. This approach has allowed Celestica to augment its market penetration in each of the markets it serves. The company has a strong presence across multiple sectors, such as aerospace and defense (A&D), Industrial, Communications, Enterprise, HealthTech and Capital Equipment businesses, which include semiconductor and display verticals. Its diverse customer base improves business resilience by reducing dependence on a single industry and minimizing the effects on financial results from an economic downturn in one specific sector.In the first quarter of 2025, its current ratio stood at 1.43 compared to the industry’s 1.19. A current ratio above 1 suggests that a company is well-positioned to meet its short-term obligations. Times interest earned increased to 11.4 in the first quarter of 2025 from 6.2 a year ago, indicating a robust improvement in its ability to match its interest rate obligations. The debt-to-capital ratio stands at 37.7% compared to the industry’s 45.9%. Celestica’s strong liquidity better positions it to navigate economic downturns and capitalize on emerging growth opportunities in the electronics manufacturing service industry.Key Challenges for CelesticaThe Electronics - Manufacturing industry is highly competitive, and the company faces stiff competition from industry giants like Foxconn, Jabil and Sanmina. Several smaller players also add to the competition at regional levels. Moreover, Jabil’s robust portfolio is gaining significant traction in the expanding AI data center infrastructure market. This could pose a challenge to Celestica’s prospects in that vertical.Sanmina is also taking several initiatives to boost its prospects in the data center vertical. The company recently inked a definitive agreement to acquire ZT Systems' data center infrastructure manufacturing business from AMD in a $3 billion deal. The acquisition will boost Sanmina’s prospects in the cloud and AI Infrastructure markets. To outmatch this growing competition, Celestica needs to make significant investments in innovation and product development. This also weighs on the margin.Moreover, Celestica generates the lion's share of its revenues outside North America. Its global dependence makes it vulnerable to geopolitical volatility and foreign exchange fluctuations.Image Source: Zacks Investment ResearchEstimate Revision TrendEarnings estimates for Celestica for 2025 and  2026 has remain unchanged for past 60 days.Image Source: Zacks Investment ResearchEnd NoteCelestica is set to gain from solid demand for its 400G switch products and 800G switch products, driven by the growing usage of high bandwidth-intensive AI applications. Management's focus on product diversification and increasing its presence in high-value markets is positive.However, stiff competition and weakness in the Advanced Technology Solutions segment are weighing on margins. Macroeconomic challenges and trade policy uncertainty in the United States are major concerns. With a Zacks Rank #3 (Hold), Celestica appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Jabil, Inc. (JBL): Free Stock Analysis Report Celestica, Inc. (CLS): Free Stock Analysis Report Sanmina Corporation (SANM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks