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
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

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

Glass piggy bank
Investing

4 Dividend Stocks to Hold in Your RRSP Forever

Inflation and volatility should spur RRSP investors to buy dependable dividend stocks like Hydro One Ltd. (TSX:H) and others right…

Read more »

protect, safe, trust
Dividend Stocks

3 Safe Stocks for Beginners Amid Rising Volatility

Given their stable cash flows and healthy growth potential, these three safe stocks are excellent buys for beginners.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

3 Cheap Bank Stocks to Buy Today

Canadians may want to snatch up top bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) that look undervalued today.

Read more »

calculate and analyze stock
Stocks for Beginners

Top TSX Stocks for Beginners in July 2022

Buying these top TSX stocks in July 2022 could help stock market beginners receive handsome returns on their investments in…

Read more »

thinking
Investing

Stocks, Bonds, or Real Estate: What’s the Best Way to Prepare for a Recession?

Recession worries could push investors to bonds.

Read more »

Oil pumps against sunset
Energy Stocks

How Would a Price Cap on Russian Oil Impact Canadian Energy Stocks?  

Canadian energy stocks surged in the last three days, as G7 countries proposed a plan to impose a price cap…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

3 Growth Stocks Worth Buying Today

With the volatility of the stock market, many investors continue to avoid growth stocks. However, here are three stocks worth…

Read more »

money cash dividends
Dividend Stocks

Market Correction: 2 Oversold TSX Dividend Stocks to Buy for Total Returns

These top value stocks pay attractive dividends and look cheap to buy for a TFSA or RRSP focused on total…

Read more »