Company Description

Celestica Inc. provides electronics manufacturing services and solutions to original equipment manufacturers (OEMs) in the consumer, communications, enterprise computing, industrial, aerospace and defense, healthcare and green technology sectors in Asia, the Americas and Europe.

Recently Reported Earnings

CLS recently reported earnings for 4Q11 and the 2011 fiscal year. Revenues increased to $7.2 billion, up from $6.5 billion in 2010. Earnings increased a little more than 100% from $0.44 per share to $0.89 per share.

Solid Earnings Surprise

While the recent track record for CLS has not been stellar, the company did recently beat earnings in a big way. The Zacks Consensus Estimate called for $0.23 and the company reported $0.32 for a $0.09 beat or 39% ahead of expectations. That size beat didn't turn into a big move for the stock.

The last time the stock beat, the June 2011 quarter, the stock moved higher by 6%. That beat was a 10% ahead of expectations, significantly less than the 39% we just saw. The most recent quarter saw a 2% move for the stock.

Topline surprises, good and bad

One reason the stock has not moved much with the earnings beats are the topline disappointments. In the most recent quarter, the revenue came 1.5% below expectations. A more sizable miss in the September 2010 quarter saw a 3.5% miss on the topline, which helped push the stock lower by 4.75%.

Valuation

CLS trades at a discount to industry averages for just about every key metrics that investors look at. We note that forward PE is almost right in line with the industry, but trailing PE shows CLS trading at a discount. Price to Sales of 0.2X also stands out, especially when compared to 1.2x the industry rate. Consistent beats on the topline would likely serve to increase that multiple.

The Chart

The price and consensus chart below shows that analysts don't have the easiest job in the world. The trend of 2012 earnings, shown in red, correlates highly with the stock price action of late. We think that as the 2013 earnings expectations take over, the stock will have a good chance of appreciating.

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service