Celestica Sees Strong Quarter

But the electronics manufacturing services company posts a first-quarter net loss and weak revenue.
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Celestica

(CLS) - Get Report

missed the consensus earnings target by a penny for the first quarter but encouraging guidance, and a subsequent analyst upgrade, nudged shares higher Thursday.

Shares of the Toronto-based company bumped up almost 5%, or 57 cents, to $11.88 in midday trading.

The electronics manufacturing services company lost $17.4 million, or 8 cents a share, compared with a loss of $11.6 million, or 5 cents a share in the year-ago quarter. Included in this quarter's net loss are $17 million in charges associated with restructuring.

Excluding items such as option expenses, amortization of intangibles, and gains or losses on the repurchase of shares or debt, the company earned $17.4 million, or 8 cents a share.

In the year-ago quarter, Celestica earned $33.4 million, or 15 cents a share. On that basis, the company missed consensus by a penny a share.

Sales for the quarter topped out at $1.93 billion, compared with $2.15 billion a year ago. The company slightly bested the consensus forecast of $1.91 billion on the top line.

"We are upgrading our rating on the shares of Celestica to strong buy from outperform," Raymond James analyst Shawn Severson wrote in a Thursday note after the results were released. "We believe the company is entering the sweet spot of its turnaround over the next three quarters.

"When combined with the fact that shares trade at only about 12 times our fiscal year 2007 EPS estimate, we find the risk reward compelling on both a near-term and long-term basis."

Severson also believes that margins will improve throughout the year.

Severson, whose company has an investment banking relationship with Celestica, upped his target price to $15 from $13.

For the second quarter, Celestica said that revenue would range from $2.05 billion to $2.25 billion and that EPS would be 8 cents to 16 cents.

Consensus was for the company to collect on the lower end of the revenue range at $2.08 billion and EPS on the higher end at 14 cents.

"Our results in the first quarter reflected the impact of a seasonal revenue decline from the fourth quarter as well as substantial investments being made to support our major new program launches and growth in our low-cost facilities," CEO Steve Delaney said in a statement.