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Factors Setting the Tone for Celestica (CLS) in Q4 Earnings

Celestica Inc. CLS is slated to report fourth-quarter 2022 results on Jan 25.

Celestica estimates non-IFRS adjusted fourth-quarter earnings between 49 cents and 55 cents per share. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 53 cents, unchanged in the last 30 days. This indicates growth of 20.45% from the year-ago reported earnings.

Revenues are envisioned to be $1.875-$2.025 billion. The consensus estimate for revenues is pegged at $1.96 billion, suggesting a year-over-year rise of 29.44%.

For fourth-quarter 2022, the company expects a negative $0.15-$0.21 per share (pre-tax) aggregate impact on net earnings on an IFRS basis for employee stock-based compensation expenses, the amortization of intangible assets (excluding computer software) and restructuring charges.

Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters, with an average surprise of 11.8%.

Let's see how things are shaping up prior to this announcement.

Celestica, Inc. Price and EPS Surprise

 

Celestica, Inc. Price and EPS Surprise
Celestica, Inc. Price and EPS Surprise

Celestica, Inc. price-eps-surprise | Celestica, Inc. Quote

Factors at Play

Celestica’s fourth-quarter performance is expected to have been driven by new project ramps in the Advanced Technology Solutions (ATS) segment and strong demand, with market share gains in the Hardware Platform Solutions (HPS) business.

Continued strength in the Capital Equipment, Industrial, and Aerospace and Defense (A&D) businesses, supported by solid demand, new program ramps and improved availability of materials, are expected to have aided top-line growth in the ATS segment.

For the fourth quarter, the company anticipates continued demand strength for the Capital Equipment and Industrial businesses, and continued growth for the A&D business as the recovery in that market has been continuing.

Markedly, the Connectivity & Cloud Solutions (CCS) segment revenues increased 32% in third-quarter 2022, driven by strength in Communications end market primarily due to the strong performance of the HPS business. The trend is expected to have continued in the to-be-reported quarter as the HPS business continues to grow, driven by strong demand from service providers, as they invest in data center expansions.

However, softness in demand from traditional OEMs on macroeconomic headwinds is likely to have negatively impacted CCS revenues in the quarter under review. Inflationary pressures are expected to have adversely impacted the company's performance by increasing costs for labor and materials.

The company’s operating costs have increased on recent growth in inflation due to the continuing impacts of the pandemic, the Russia/Ukraine conflict and related international responses, and the uncertain economic environment.

Restructuring initiatives are likely to have limited overall margin expansion in the fourth quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. But that’s not the case here.

Celestica has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, MSCI MSCI, Meta Platforms META and Lam Research LRCX have the right combination of elements to post an earnings beat in their upcoming releases.

MSCI currently carries a Zacks Rank #2 and has an Earnings ESP of +0.43%. The company is scheduled to report fourth-quarter 2022 results on Jan 31. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters, while missing the same once, the average surprise being 3.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MSCI’s fourth-quarter earnings is pegged at $2.71 per share, implying a year-over-year increase of 8%. It is estimated to report revenues of $565.2 million, which suggests growth of 2.8% from the year-ago quarter.

Meta is slated to report fourth-quarter 2022 results on Feb 1. The company has a Zacks Rank #3 and an Earnings ESP of +10.48% at present. META’s earnings beat the Zacks Consensus Estimate once in the trailing four quarters, while missing the same on three occasions, the average surprise being a negative 2.6%.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.12 per share, suggesting a decline of 42.2% from the year-ago quarter’s earnings of $3.67. Meta’s quarterly revenues are estimated to decline 7.2% year over year to $31.2 billion.

Lam Research currently carries a Zacks Rank #3 and has an Earnings ESP of +0.42%. The company is slated to report second-quarter fiscal 2023 results on Jan 25. Its earnings surpassed the Zacks Consensus Estimate thrice in the trailing four quarters, while missing the same on one occasion, the average surprise being 7.4%.

The Zacks Consensus Estimate for LRCX’s fiscal second-quarter earnings is pegged at $9.96 per share, indicating a year-over-year increase of 16.8%. The consensus mark for revenues is pegged at $5.1 billion, suggesting a year-over-year increase of 20.3%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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