Is Celestica (CLS) Stock a Smart Buy Ahead of Q2 Earnings?

Core Insights - Celestica is not expected to beat earnings estimates for the second quarter, with an Earnings ESP of 0.00% and a Zacks Rank of 3 (Hold) [2][3] - The company has signed an agreement to acquire NCS Global Services LLC for $36 million, which will enhance its Connectivity and Cloud Solutions segment [4] - The CCS segment is experiencing strong momentum due to healthy demand for AI/ML, while the ATS segment faces challenges from a slowdown in the electric vehicle market [5][6] Financial Performance - Celestica is scheduled to report second-quarter 2024 earnings on July 24, with revenue estimates at $2.25 billion, reflecting a 15.78% year-over-year growth, and earnings per share estimated at 81 cents, indicating a 47.27% increase year-over-year [13] - The company has achieved a four-quarter earnings surprise of 13.09%, with the last quarter showing a 19.44% surprise [14] Product Development - The company launched a series of enterprise access networking switches, which are expected to contribute to incremental revenues [16] - The 800G platform for high bandwidth AI applications is gaining traction, alongside strong demand for 400G switches [17] Competitive Landscape - Despite strong demand for AI-powered products, competition from Flex Ltd. and Jabil Inc. is exerting pressure on margins [18] - Over the past year, Celestica's stock has increased by 250.9%, outperforming the industry growth of 25.3% and competitors like Flex and Jabil [19] Valuation Metrics - Celestica's shares are trading at a premium valuation, with a price/earnings ratio of 16.12 compared to the industry average of 14.38 [20] - The company has a diversified product portfolio that capitalizes on the growth of AI applications, supported by strong demand across various end markets [21]