Celestica vs. Jabil: Which EMS Stock is a Better Bet Right Now?

Celestica Inc. CLS and Jabil Inc. JBL are two leading players in the electronics manufacturing services (EMS) industry. Celestica is one of the largest EMS companies in the world, primarily serving original equipment manufacturers, cloud-based and other service providers, and business enterprises across several industries. It offers a comprehensive range of manufacturing and supply-chain solutions that support various customer requirements, from low-volume, high-complexity custom products to high-volume commodity products.On the other hand, Jabil is one of the largest global suppliers of EMS solutions. The company offers electronics design, production, product management and after-market services to customers in the aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries. With domain-specific expertise in core areas, both Celestica and Jabil are strategically positioned in the EMS landscape and have the wherewithal to cater to the evolving demands of business enterprises. Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.The Case for CelesticaWith more than 25 years of experience in manufacturing, backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The company had benefited from the ongoing generative AI (artificial intelligence) boom, thanks to the solid demand trends for AI/ML (machine learning) compute and networking products from hyperscale customers.By integrating next-generation networking products with silicon photonics packaging solutions, Celestica aims to optimize supply chain solutions to reduce time to market. The data center switches combined with optical transceivers have the potential to handle and sustain high volumes of both inbound and outbound network traffic and cater to the demand for data center bandwidth for supporting AI/ML and data analytics applications. These state-of-the-art products have translated into solid top-line growth in recent years.However, the company remains plagued by margin woes. Celestica’s products are highly sophisticated and typically based on the latest technological innovations, which have historically led to high research and development costs. High operating expenses have contracted margins. Moreover, besides Jabil, Celestica faces stiff competition from industry giants like Foxconn, Flex and Sanmina Corporation SANM. The highly cyclical nature of the semiconductor industry further remains an overhang, particularly in the aftermath of reciprocal tariffs.The Case for JabilWith a presence across 100 locations in 30 countries, Jabil is likely to gain from secular growth drivers with strong margin and cash flow dynamics. Moreover, its unmatched end-market experience, technical and design capabilities, manufacturing know-how, supply chain insights and global product management expertise have put it in good stead. An extensive global footprint is further strengthened by a centralized procurement process, which, coupled with a single Enterprise Resource Planning system, aids customers with end-to-end supply chain visibility.Jabil’s focus on end-market and product diversification is a key catalyst. The company’s target that “no product or product family should be greater than 5% operating income or cash flows in any fiscal year” is commendable. The diversification increases the reliability of the company’s earnings and revenues, thereby driving returns for investors in the long term. In addition, Jabil’s top-line growth is expected to benefit from strength in healthcare, cloud, retail and industrial. The company is likely to gain from the rapid adoption of 5G wireless and cloud computing. However, Jabil operates in a highly competitive environment, facing competition from both domestic and international electronic manufacturers, manufacturing service providers and designers like Sanmina. The tense geopolitical situation between the United States and China and the wars in Europe and the Middle East remain headwinds. Against the backdrop of this global uncertainty, low demand in some consumer-centric markets is negatively impacting its margins.How Do Zacks Estimates Compare for CLS & JBL?The Zacks Consensus Estimate for Celestica’s 2025 sales and EPS implies year-over-year growth of 11.7% and 23.2%, respectively. The EPS estimates have been trending northward over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Jabil’s 2025 sales implies a year-over-year decline of 3.4%, while that of EPS suggests growth of 5.5%. The EPS estimates have been trending northward over the past 60 days.Image Source: Zacks Investment ResearchPrice Performance & Valuation of CLS & JBLOver the past year, Celestica has gained 83.9% compared with the industry’s growth of 23.2%. Jabil has gained 3.3% over the same period.Image Source: Zacks Investment ResearchJabil looks more attractive than Celestica from a valuation standpoint. Going by the price/earnings ratio, Jabil’s shares currently trade at 13.57 forward earnings, slightly lower than 15.74 for Celestica.Image Source: Zacks Investment ResearchCLS or JBL: Which is a Better Pick?While Celestica carries a Zacks Rank #3 (Hold), Jabil has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Celestica expects sales and profits to improve in 2025, while Jabil’s top line is likely to decrease amid tariff woes. Celestica has shown a sharp revenue and EPS growth over the years, while Jabil has been facing a downtrend. Celestica boasts a better price performance, but Jabil’s valuation metrics appear comparatively more attractive. However, based solely on Zacks Rank, Jabil is relatively better placed than Celestica, tilting the overall scale in its favor. Consequently, Jabil seems to be a better investment option at the moment.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Jabil, Inc. (JBL): Free Stock Analysis Report Celestica, Inc. (CLS): Free Stock Analysis Report Sanmina Corporation (SANM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks