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

Core Insights - Celestica, Inc. (CLS) is set to report second-quarter 2025 earnings on July 28, with sales and earnings estimates at $2.67 billion and $1.24 per share respectively, showing a 0.4% increase in earnings estimates for 2025 over the past 60 days [1][4] Earnings Performance - Celestica has a strong earnings surprise history, with an average surprise of 7.43% over the last four quarters, consistently exceeding earnings expectations [2][3] Earnings Predictions - The company is predicted to likely beat earnings for the second quarter, supported by a positive Earnings ESP of +0.81% and a Zacks Rank of 2 (Buy) [4] Product Developments - The introduction of the ES1500 enterprise access switch, featuring up to 48 ports with 2.5 gigabit Ethernet speed and 90W power over Ethernet, is expected to enhance scalability and flexibility for modern IT infrastructure [5][8] - The DS4100 switch, which supports high-bandwidth demands, is also gaining traction, contributing to net sales growth in the Connectivity & Cloud Solutions segment [9] Market Performance - Over the past year, CLS stock has surged 193.8%, outperforming the industry growth of 93.8% and competitors like Sanmina Corporation (37.7%) and Jabil Inc. (98.8%) [10] Valuation Metrics - Celestica is trading at a premium valuation with a price/earnings ratio of 27.88, higher than the industry average of 21.73 and its own historical mean of 20.9 [11] Industry Positioning - As a leading electronic manufacturing service provider, Celestica serves various industries, including communication, healthcare, and aerospace, while continuously enhancing its manufacturing and supply-chain capabilities [13][15] - The growing demand for AI-based applications is driving the need for Celestica's data communications infrastructure products, with expectations for significant growth in 400G and 800G switch products [16] Competitive Landscape - While Celestica is expanding in the AI data center infrastructure, it faces competition from Jabil, which is investing $500 million to increase its manufacturing capacity, and Sanmina in the defense and AI infrastructure sectors [17] Financial Health - Celestica's diverse customer base across multiple sectors enhances business resilience, supported by strong liquidity and healthy cash flow, positioning the company for potential stock price appreciation [19]