CLS Stock Before Q2 Earnings: A Smart Buy or Risky Investment?

Celestica, Inc. CLS is scheduled to report second-quarter 2025 earnings on July 28. The Zacks Consensus Estimate for sales and earnings is pegged at $2.67 billion and $1.24 per share, respectively. Earnings estimates for CLS have moved up 0.4% for 2025 and have remained unchanged for 2026, over the past 60 days.Image Source: Zacks Investment ResearchEarnings Surprise HistoryThe leading electronics manufacturing services firm has had a solid earnings surprise history in the trailing four quarters, exceeding earnings expectations on most occasions. It delivered a four-quarter earnings surprise of 7.43%, on average.Image Source: Zacks Investment ResearchEarnings WhispersOur proven model predicts a likely earnings beat for Celestica for the second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is exactly the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Celestica currently has an ESP of +0.81% with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Shaping Upcoming ResultsDuring the quarter, Celestica introduced ES1500, a state-of-the-art enterprise access switch, offering up to 48 ports with 2.5 gigabit Ethernet per port speed. 90W power over Ethernet for connected devices ensures greater scalability and flexibility. As modern IT infrastructure becomes more complex with high-density IoT deployments, cloud application companies across industries are looking for ways to optimize their capital and operational expenditure. With high-speed, scalable ports and compact design, Celestica’s ES1500 switch is well equipped to meet these criteria.Celestica’s DS4100, a 1U 800G per port top-of-rack, leaf/spine switch, is also gaining traction. The solution, powered by Broadcom’s TH4-12.8T switch chipset, effectively supports the high-bandwidth demands of data center networking. These factors are expected to have driven net sales in the Connectivity & Cloud Solutions segment. However, the company is witnessing demand softness in the Advanced Technology Solutions vertical. Elevated inventory levels in some end markets are hindering growth.Price PerformanceOver the past year, CLS has surged 193.8% compared with the industry’s growth of 93.8%. It has also outperformed its peers like Sanmina Corporation SANM and Jabil Inc. JBL over this period. Sanmina has gained 37.7% and Jabil is up 98.8% over this period.Image Source: Zacks Investment ResearchKey Valuation MetricFrom a valuation standpoint, Celestica appears to be trading at a premium relative to the industry and is trading above its mean. Going by the price/earnings ratio, the company’s shares currently trade at 27.88 forward earnings, higher than 21.73 for the industry and the stock’s mean of 20.9.Image Source: Zacks Investment ResearchInvestment ConsiderationsOperating as one of the largest electronic manufacturing service companies in the world, Celestica offers a comprehensive portfolio catering to varied requirements of several industries, including communication, healthcare, aerospace and defense, energy, semiconductor and various cloud-based and other service providers. Moreover, the company is always enhancing its manufacturing, engineering, design, quality and supply-chain capabilities while developing trusted relationships with leading customers.Growing proliferation of AI-based applications and generative AI tools is driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects and edge solutions. Moreover, Celestica’s approach of collaborating with several industry leaders, such as Advanced Micro Devices and Broadcom, to expand portfolio offerings augurs well for long-term growth. Management expects that growing demand for its 400G switch products and 800G switch products will be a major growth driver in the upcoming quarters.Celestica is gaining ground in the AI data center infrastructure. However, Jabil is also aggressively expanding its presence in this vertical. It is investing $500 million in the Southeast United States to increase its manufacturing capacity. Jabil’s strategy can pose a challenge to Celestica’s ambition in the AI data center domain. The company is also facing competition from Sanmina in defense and AI infrastructure spaces.End NoteCelestica stock’s premium valuation is a concern. Dynamic macro environment, owing to trade policy uncertainty, is a headwind.However, its strong focus on product diversification and increasing presence in high-value markets is a positive factor. CLS boasts a diverse customer base from multiple sectors, which enhances business resilience by reducing reliance on a single industry and minimizing the effects on financial results from an economic downturn in one specific sector. Its strong liquidity and healthy cashflow underscore efficient capital management. With a Zacks Rank #2 and upward estimate revision, Celestica appears to be primed for further stock price appreciation.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