TORONTO - Celestica Inc. saw its second-quarter revenue fall by 14 per cent after losing BlackBerry as a customer, but the contract manufacturer still beat analyst expectations thanks to stronger end-user demand for communications equipment.
The company knew it would take a hit from losing BlackBerry (TSX:BB) as a customer as a result of the smartphone company's slimmed-down strategy — which included rebranding the company formerly known as Research In Motion.
As it turned out, the decline from the second quarter of 2012 wasn't as bad as expected, falling to US$1.495 billion from $1.744 billion last year when it still had the BlackBerry work.
"All else being equal, if you exclude RIM, we expect to be up three per cent year-over-year so we're seeing good growth," Celestica chief financial officer Darren Myers told analysts during a conference call Friday.
Analysts had estimated the Toronto-based manufacturing services company, which reports in U.S. currency, would have $1.438 billion of revenue.
Adjusted earnings were $38.6 million or 21 cents per share, down from $47.1 million or 22 cents per share during the same period last year but far better than expected.
Analysts had been looking for Celestica to deliver 17 cents per share of adjusted EPS — midway in the company's range of between 13 and 19 cents per share.
Celestica also beat expectations in terms of revenue and net income.
"We expect this momentum to continue as we move through the second half of this year," said Craig Muhlhauser, Celestica's president and chief executive.
Celestica said it expects demand in the communications end market, which was stronger than anticipated during the second quarter, to hold that pace in the current quarter.
"You have to take into account from a sequential basis just the extra revenue that we delivered in the second quarter," Myers said.
The communications segment accounted for 42 per cent of Celestica's overall revenue in the three months ended June 30, up from 40 per cent in the previous quarter ended March 31 and up from 32 per cent a year earlier.
The big decline was in Celestica's consumer products sector, which accounted for only seven per cent of total revenue in the latest quarter, down from 21 per cent a year earlier.
The company said the loss of BlackBerry pushed its consumer products sector down 72 per cent from a year ago, more than offsetting the ramp up of a new program with another customer.
Celestica also reported 15 cents per share of net income, up from 11 cents per share and above the analyst estimate of eight cents of net income.
"Despite the challenging economic environment, we are projecting continued growth in our diversified end market for the third quarter," Muhlhauser said in a statement.
He also announced Celestica expects to buy back shares through a normal course issuer bid that it intends to launch this quarter.
The company estimates it will deliver between 17 and 23 cents of adjusted earnings during the current quarter, which ends Sept. 30. Celestica's guidance also calls for between $1.425 billion and $1.525 million of revenue.
RBC Capital Markets raised its price target on the stock Friday to $10 from $9.
RBC analyst Amit Daryanani wrote in a note to clients that Celestica reported an "impressive" June quarter.
"We expect the stock will continue to trade modestly higher given expectation of likely upside," Daryanani wrote.
Celestica shares closed up 62 cents or about six per cent at $10.40 on the Toronto Stock Exchange.
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