Celestica, a Zacks Rank #1 (Strong Buy), is one of the largest electronics manufacturing companies in the world. This company provides supply chain solutions in North America, Europe, as well as Asia. The stock is displaying relative strength, breaking out to the upside amid a bullish move that pushed shares to new all-time highs.
The price movement is a sign of strength as we approach the New Year. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.
Celestica is part of the Zacks Electronics – Manufacturing Services industry group, which currently ranks in the top 6% out of more than 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months, just as it has over the prior 3 months:
Image Source: Zacks Investment Research
Also note the favorable metrics for this industry group below:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.
Company Description
Celestica provides a range of services such as new product design and development, engineering and component sourcing, complex mechanical assembly, systems integration, and logistics.
The company has also been involved in the AI movement in terms of delivering platform solutions, which includes development of infrastructure platforms along with hardware and software design services.
Celestica offers their products and services to hyperscalers, cloud-based providers, and original equipment manufacturers. The company serves a variety of industries such as aerospace and defense, industrial, capital equipment, and communication markets.
Earnings Trends and Future Estimates
A leading electronics manufacturer, Celestica CLS has built up an impressive reporting history and hasn’t missed the earnings mark in many years. The company has delivered a trailing four-quarter average earnings beat of 13.2%.
Back in October, Celestica reported third-quarter earnings of $1.04 per share, a 10.6% surprise over the $0.94/share consensus estimate. Revenues of $2.5 billion also exceeded projections by 3.7%.
Analysts are bullish on the stock and have been raising earnings estimates across the board. The fourth-quarter consensus EPS estimate has been revised upward in the past 60 days by 7.22% to $1.04/share. If the company is able to achieve this, it would translate to a 36.8% growth rate versus the same quarter last year.
Image Source: Zacks Investment Research
Let’s Get Technical
This market leader has seen its stock advance more than 200% in 2024 alone. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs throughout the year. With both strong fundamental and technical indicators, CLS stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Celestica has recently witnessed positive revisions. As long as this trend remains intact (and CLS continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Backed by a leading industry group and history of earnings beats, it’s not difficult to see why Celestica stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.
Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put CLS on your shortlist.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
