TORONTO - Celestica Inc . (TSX: NYSE:CLS) (NYSE: CLS), a global provider of design, manufacturing, hardware platform, and supply chain solutions, announced an expansion of its senior secured credit agreement to $1.5 billion to bolster its growth initiatives.
The amended agreement includes an increase of the revolving loan facility from $600 million to $750 million, with an extended maturity date from March 2025 to June 2029.
Additionally, the new structure introduces Term A and Term B loans totaling $750 million, replacing the previous term loans totaling $604 million. The Term A Loan, set at $250 million, and the Term B Loan, at $500 million, will mature in June 2029 and June 2031, respectively. These loans were fully drawn upon closing, with a large portion of the proceeds used to repay existing debts and the remainder allocated for general corporate activities.
The financing was facilitated by a syndicate of lenders, with Bank of America (NYSE:BAC), N.A. serving as the Administrative Agent. BofA Securities, Inc. took the lead as Left Lead Arranger and Left Lead Bookrunner, alongside other major financial institutions participating as Joint Lead Arrangers, Joint Bookrunners, and Co-Syndication Agents.
Interest rates for the Term A Loan start at adjusted Term SOFR plus 1.75%, with quarterly repayments of $3.125 million. The Term B Loan carries an interest at Term SOFR plus 1.75% and mandates quarterly repayments of $1.250 million. The interest rates for both loans are subject to variations based on the company's consolidated total net leverage ratio.
Celestica, recognized for its customer-centric approach, collaborates with leading brands across various sectors, including Aerospace and Defense, Communications, Enterprise, HealthTech, and Industrial. The company prides itself on delivering comprehensive solutions from product conception to full-scale production and after-market services.
This financial restructuring is part of Celestica's strategy to sustain its growth trajectory and maintain its position in providing complex solutions to its clients. The information is based on a press release statement from Celestica International LP.
In other recent news, Celestica Inc. has been experiencing significant developments. The company reported strong Q1 2024 performance, with revenues reaching $2.21 billion and adjusted earnings per share (EPS) of $0.86. This was primarily driven by the strength of the Capital Equipment Solutions (CCS) segment and demand from hyperscale customers.
As a result, Celestica has increased its full-year outlook, now expecting a 14% increase in revenue to $9.1 billion and a 36% rise in adjusted EPS to $3.30 for 2024.
BMO Capital Markets has increased its price target for Celestica to Cdn$63.00, maintaining an Outperform rating. This revision reflects recent investor meetings and the company's advantageous position to capitalize on AI-driven hyperscaler capital expenditures.
Similarly, Stifel has raised its price target for Celestica to $51.00, citing the company's strong positioning in data-center computing and broader industrial markets, while maintaining a Hold rating. Still, a CIBC analyst has downgraded Celestica from Outperformer to Neutral, despite raising the stock price target to $49, due to concerns over a potential slowdown in the company's Enterprise segment.
These recent developments indicate a positive trajectory for Celestica, with a focus on AI-driven hyperscaler capital expenditures and robust financial results. The company's strategic positioning and anticipated growth are backed by analysis from several analyst firms, suggesting a promising future for Celestica in its market segment.
InvestingPro Insights
In light of Celestica Inc.'s recent announcement regarding the expansion of its senior secured credit agreement, it is worth noting some key financial metrics and insights that reflect the company's current market position.
According to real-time data from InvestingPro, Celestica boasts a market capitalization of $6.67 billion USD, indicating a substantial presence in the Electronic Equipment, Instruments & Components industry. This is reinforced by an impressive year-to-date price total return of 101.81%, signaling strong investor confidence and a robust growth trajectory.
Despite challenges like weak gross profit margins, which currently stand at 10.12%, Celestica's revenue growth remains vigorous, with the last twelve months as of Q1 2024 showing a 10.79% increase. Moreover, the company's aggressive share buyback strategy, as highlighted in one of the InvestingPro Tips, suggests a management team that is bullish about its future and committed to delivering shareholder value.
For investors considering Celestica's stock, another InvestingPro Tip points out that it is trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 20.91. This could indicate that the stock is potentially undervalued given its earnings prospects. The company's strong performance is not limited to the short term; it has also demonstrated a high return over the last year, with a staggering 299.8% price total return.
For those interested in a deeper dive into Celestica's financial health and stock performance, InvestingPro offers a wealth of additional tips. In fact, there are 15 more InvestingPro Tips available, which can provide valuable context and guidance for both current and potential investors. To explore these further, consider visiting https://www.investing.com/pro/CLS and don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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