Celestica Inc. CLS recorded solid third-quarter results with  adjusted earnings and  revenues beating the respective Zacks Consensus Estimate. The Toronto-based electronics manufacturing service provider reported revenue growth year over year, backed by stronger-than-expected growth in the CCS segment.

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Management’s strong emphasis on innovation, product diversification, and AI advancements are key growth drivers. Strong growth in adjusted free cash flow is a tailwind.

Net Income

Quarterly net earnings were $91.7 million or 77 cents per share, up from $80.2 million or 67 cents per share in the year-ago quarter owing to top-line expansion.

Non-IFRS net earnings improved to $123.8 million or $1.04 per share from $78.2 million or 65 cents per share in the year-ago quarter.  Adjusted earnings beat the Zacks Consensus Estimate by 10 cents.

Celestica, Inc. Price, Consensus and EPS Surprise

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

Revenue

Quarterly revenues were $2.5 billion, up 22% from $2.04 billion in the year-ago quarter. Healthy demand in the CCS segment cushioned the top line. Revenues beat the Zacks Consensus Estimate of $2.41 billion.

Quarterly Segment Results

Connectivity & Cloud Solutions (CCS): Total revenues from this segment improved to $1.68 billion from $1.18 billion. The 42% increase was primarily driven by strong demand in the enterprise and communications end markets. It accounted for 67% of the company’s total revenues in the third quarter.

Revenues in the enterprise end market increased 38% year over year due to stronger-than-expected demand owing to program dynamics in the storage business. 

The Communications end market reported a revenue growth of 45%. Solid growth in the HPS portfolio backed by hyperscaler customer demand for networking products, including 400G switches and 800G switches, propelled net sales growth in the communications end market.

The segment’s operating income increased to $128.7 from $73.6 million for respective margins of 7.6% and 6.2%, driven by greater operating leverage and improved mix.

Advanced Technology Solutions (ATS): This segment’s revenues were down 5% to $814.1 million due to lower demand in the industrial end market, partially offset by solid growth in the Aerospace and Defense and Capital Equipment businesses. It accounted for 33% of total revenues in the third quarter. 

The segment’s operating income decreased from $42.1 million to $39 million with a margin of 4.8% due to lower operating leverage in the industrial end market, partially offset by improvement in capital equipment and A&D.