Celestica Shares are Soaring – What You Need to Know

This Fool walks you through a better than expected quarter for Celestica.

| More on:
The Motley Fool

Celestica has been on a roll lately, and yesterday the company reported results that beat expectations for the fourth quarter in a row.  The stock is up over 7% today and over 43% year to date.  Celestica reported EPS of $0.22, which is at the high end of where the company was guiding.  Here’s what you need to know about the quarter.

Impressive Operating Margin Expansion

Operating margin continues to expand.  In the third quarter the company achieved an operating margin of 3.2% versus a margin of 2.9% in the third quarter of 2012.  This comes as the company is focusing on higher margin end markets, and as they are achieving cost efficiencies.  We can expect more margin improvements in the fourth quarter.

Big Success in New Markets

Celestica’s Diversified business segment, which accounted for 26% of revenue this quarter and includes the healthcare, industrial, aerospace and defence end-markets, saw revenues increase 16% versus last year and 6% sequentially.  This was due to new programs and higher demand across a broad range of customers.

Demand is Still Volatile and Lacking Visibility

While management stated on their conference call that they still view the environment as challenging, volatile, and lacking visibility, it looks like their different end markets are behaving somewhat differently and this makes for more evened out results despite the lack of visibility.

Diversification Continues

The top 10 customers this quarter represented 65% of revenues, compared to 70%+ in 2012.  Celestica has diversified its customer base as well as its business segments that it is involved in.  This is an attractive proposition for us investors who are concerned with managing risk.

Blackberry Who?

Celestica has done an outstanding job of overcoming the loss of Blackberry as its most important customer.  Overall revenue this quarter decreased 5.3% compared to the same quarter last year, which is impressive showing considering that Blackberry accounted for 20% of revenue in 2012.  If we exclude Blackberry, revenue increased 5% this quarter.

Share Buyback to Return Capital to Shareholders

This quarter, the company bought back 1.7 million shares as it continues on its strategy to return capital to its shareholders.  By the third quarter of 2014, the company will have bought back up to 10 million shares, thus strengthening EPS numbers.

Bottom Line

Celestica is doing all the right things recently and is recovering beautifully from the blow of losing Blackberry as its most important customer.  Management has done an impressive job and the future is looking bright.

Looking for another company with a bright future?  Click here now and download The Motley Fool Canada’s small cap stock for 2013….and beyond!  It’s FREE!

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Karen Thomas owns shares of Celestica.  The Motley Fool has no positions in the stocks mentioned above at this time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

Canadian flag
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 8% to Hold for Decades

Do you want some dividends with those returns? Then buy this stock while it's down.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Suncor Energy: Buy, Sell, or Hold in 2025?

Let's dive into the risks and catalysts underpinning Suncor Energy (TSX:SU) right now and see if this stock is worth…

Read more »

A plant grows from coins.
Stocks for Beginners

Rebalancing Your Portfolio for 2025? 3 Growth Stocks to Consider

There's no shortage of great growth stocks to consider for your portfolio. Here's a look at three that could provide…

Read more »

calculate and analyze stock
Dividend Stocks

2 Stocks That Cut You a Cheque Each Month

These two top Canadian monthly dividend stocks could help you generate reliable passive income for years to come.

Read more »

engineer at wind farm
Dividend Stocks

Fortis Stock: Buy, Sell, or Hold in 2025?

With Fortis now trading just off its 52-week high, is it still one of the best Canadian stocks to buy…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Investing

From Markdown to Mark-Up, 2 Red-Hot Clothing Stocks Leading the Revival

Aritzia (TSX:ATZ) and another clothing stock could keep soaring through another year!

Read more »

Investor reading the newspaper
Investing

Where to Invest $3,000 in February

Given their solid underlying businesses and healthy growth prospects, the following three TSX stocks would be ideal buys despite the…

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

The 3 Best Canadian Stocks to Buy Now and Hold Forever in an RRSP

There's a lot to consider when eyeing up some long-term holds in an RRSP, so let's get into it.

Read more »