Yesterday, the Bureau of Labor Statistics announced that the United States Consumer Price Index rose 3.3% in January compared to its previous year’s month. It was higher than economists’ projection of 3.2%. With inflation coming hotter than expected, the hopes of interest rate cuts this year have faded. The uncertainty over the impact of tariffs on global economic growth could drive volatility in the equity markets. Despite a volatile outlook, I believe the following two stocks could deliver superior returns due to their solid financials and healthy growth prospects.
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Celestica
Celestica (TSX:CLS) has continued its uptrend in this volatile environment, with its stock price rising 37% year to date and 255% in the last 12 months. Its solid quarterly performances in the previous four quarters and healthy growth prospects have boosted its stock price. The EMS (electronics manufacturing services) company recently reported an impressive fourth-quarter performance, with its top line growing by 19% to $2.55 billion. A strong performance from its CCS (Connectivity & Cloud Solutions) segment, which posted a revenue growth of 30%, boosted its sales. Meanwhile, the revenue from its ATS (Advanced Technology Solutions) segment remained flat.
Further, the company’s adjusted operating margin expanded from 6% to 6.8%. Supported by revenue growth and expansion of its operating margin, the company’s adjusted EPS (earning per share) grew 44.2%. Meanwhile, the company’s management expects the momentum in the expansion of data centres to continue, thus driving the demand for its products and services.
Meanwhile, a large hyperscaler customer recently awarded Celestica a 1.6-terabyte switching program, requiring Celestica to support the customer in designing and producing a fully artificial intelligence-optimized networking rack. Another customer has awarded Celestica a new HPS (hardware platform solutions) program, where Celestics would collaborate with the customer to develop a full-rack artificial intelligence-optimized networking rack. Amid its solid fourth-quarter performance and healthy growth prospects, Celestica’s management has raised its 2025 guidance. The new guidance represents a revenue growth of 10.9%, while its adjusted EPS could grow by 22.4%. Considering its healthy growth prospects, I believe Celestica’s stock price rally could continue.
Waste Connections
I have chosen a defensive stock, Waste Connections (TSX:WCN), as my second pick. Its resilient solid waste management business makes its financials less susceptible to market volatility. Further, it operates predominantly in secondary and exclusive markets, thus facing lesser competition and enjoying higher margins. Meanwhile, the company reported an excellent fourth-quarter performance yesterday, with its top line growing by 11% to $2.26 billion. The price-led organic growth and acquisitions drove its sales. The company completed record acquisitions last year, which can add around $750 million to its annualized revenue.
Meanwhile, the company incurred a net loss of $196 million during the quarters, primarily due to one-time or extraordinary impairments-related expenses. However, removing these costs, the company’s adjusted EPS stood at $1.16, representing a year-over-year growth of 4.5%. Moreover, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 11.6% while expanding its adjusted EBITDA margin by 20 basis points to 32.4%.
WCN has also provided a healthy 2025 guidance, with its top line projected to come between $9.45 and $9.60 billion. The midpoint of the guidance represents a 6.8% increase from the previous year. The company’s management also expects its adjusted EBITDA margin to expand 50-80 basis points while growing its adjusted free cash flows by 8.8%. Given its resilient waste management business and healthy growth prospects, WCN could continue to boost its financials, thus supporting its stock price growth.
