Celestica Stock is a Play on Supply Chain Solutions

Electronics manufacturer Celestica NYSE: CLS stock has shown exceptional relative strength trading up nearly 10% for 2022. Celestica is outperforming the benchmark indexes and is poised to breakout higher. The Company is thriving during the supply chain and logistics disruption as it provides sourcing, manufacturing, assembly, testing, and aftermarket repair and return services. Its acquisition of electronics manufacturer supplier, PCI, was immediately accretive and serves as a synergistic component in its overall Life Cycle Solutions portfolio. Its seeing a return to growth in its ATS, Communications and Enterprise end-market revenues. Operating margins continue to improve as shares trade at a cheap 7.7 forward P/E. Prudent investors seeking exposure in a supply chain solutions player can watch for opportunistic pullbacks in shares of Celestica.

Q4 Fiscal 2022 Earnings Release

On Dec. 16, 2021, Jabil reported its Q1 fiscal 2021 results for the quarter ending December 2021. The Company reported earnings-per-share (EPS) of $0.44 versus consensus analyst estimates for $0.38, a $0.06 beat. Revenues grew 9.1% year-over-year (YoY) to $1.51 billion meeting analyst estimates for $1.51 billion. Diversified manufacturing services (DMS) revenues rose 11% YoY. Electronics manufacturing services (EMS) revenues grew 7% YoY. Celestica CEO Rob Mionis commented, “Celestica’s solid performance in the fourth quarter capped a successful 2021 for our company. We returned to top-line year-over-year revenue growth, our non-IFRS operating margin of 4.9% marked yet another record, our non-IFRS adjusted EPS of $0.44 was our highest in more than 20 years, and we closed on our acquisition of PCI.”

Upside Guidance  

Celestica raised its fiscal Q1 2022 EPS guidance to a range of $0.31 to $0.37 versus $0.31 analyst estimates. Revenues are expected to come in between $1.40-$1.55 billion compared to $1.42 billion consensus analyst estimates. The Company expects full-year fiscal 2022 revenue between $6.30 billion to $6.33 billion and guides to 2022 non-IFRS operating margin of 4% to 5%.  

Conference Call Takeaways

CEO Mionis noted its first acquisition three years, PCI, was immediately accretive in addition to reaching top-line growth in Q4 2021. It’s hardware platform solutions (HPS) experienced 34% YoY growth to $1.15 billion in sales as they continue to gain market share and drive growth in its CCS segment. The ATS segment grew sales to $750 million and the Company expects at least 10% growth in 2022 supported by continued strength in the capital equipment business, PCI accelerated industrial business and the continued recovery in the aerospace and defense segments. He concluded, “While 2022 is by no means anticipated to be without its share of challenges. We expect to build on the positive momentum we have established in 2021 and lead the company to another strong year of financial performance by executing on our strategic and operational objectives.”

CFO Comments

Celestica CFO Mandeep Chawla noted that the Cisco disengagement was offset thanks to the 5% growth in its non-fiscal portfolio driven by service provider clients. The HPS business grew 66% YoY to $350 million in Q4 2021. ATS margin rose 170 basis points YoY delivering a segment margin of 5.6%. The Company generated $115 million in free cash flow and ending 2021 with $1 billion in liquidity including  of $370 million in cash and 124.7 million shares outstanding.

CLS Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for CLS stock. The weekly rifle chart uptrend peaked at $13.41 Fibonacci (fib) level. The weekly rifle chart has a pup breakout with a rising 5-period moving average (MA) support at $11.85 followed by the 15-period MA at $11.25. The weekly upper Bollinger Bands overlap near the $13.41 fib level. The weekly stochastic is attempting to mini pup under the 80-band. The weekly market structure low (MSL) buy triggers on a breakout through the $11.35. The daily rifle chart has a make or break with a flattening 5-period MA at $12.07 attempting to form a pup breakout. The daily stochastic has a mini inverse pup that is stalling at the 70-band to either cross up or collapse. The daily upper BBs sit at $13.59 as it expands. Prudent investors can look for opportunistic pullback levels at the $11.38 fib, $10.53 fib, $9.93 fib, $9.33 fib, $8.58 fib, $7.98 fib, and the $7.40 fib level. Upside trajectories range from the $17.75 fib up towards the $20.65 fib level.