CLS vs. JBL: Which EMS Stock is a Better Investment Right Now?

Celestica Inc. CLS and Jabil Inc. JBL are two leading players in the electronics manufacturing services (EMS) industry. Jabil offers electronics design, production, product management and after-market services to customers across several industries. 

Celestica is one of the leading electronics manufacturing services companies in the world, primarily serving original equipment manufacturers, cloud-based and other service providers and enterprises from several domains. The company offers a comprehensive range of manufacturing and supply-chain solutions related to design and development, new product introduction, engineering services, component sourcing, electronics manufacturing and assembly, testing, systems integration, logistics and various other services.

The EMS industry is highly competitive and rapidly evolving as per changing market dynamics. AI, data center expansion, growth in consumer electronics, 5G adoption, IoT proliferation, automotive innovation, shift in global supply chains are primarily fueling growth in the EMS industry. With domain-specific expertise in core areas, both Celestica and Jabil are strategically positioned in this evolving EMS landscape. Let us dive deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.

The Case for Jabil

Jabil is benefiting from solid AI-related growth in cloud, data center infrastructure, and capital equipment markets. The company’s holistic approach in the data center market, strong engineering and design architecture collaboration, combined with its ability to deliver complex high-volume production at scale, makes Jabil a lucrative choice for hyperscalers and silicon providers. The company’s AI-related revenues are projected to reach $8.5 billion in 2025, indicating 50% year-over-year growth. 

Per Fortune Business Insights AI data center market is forecasted to grow from $15.02 billion in 2024 to $93.60 billion in 2032 with a 26.8% compound annual growth rate. To capitalize on this strong momentum, the company plans to invest $500 million over the next several years in the Southeast U.S. region. The investment is focused on expanding manufacturing capabilities and workforce development for the cloud and AI data center infrastructure market. The strategic investment will strengthen Jabil’s position in the AI hardware supply chain. 

The initiative is also part of Jabil’s strategy of mitigating tariff risks and geopolitical unrest. It has an established global presence and a worldwide connected factory network, which enables it to scale up production per the evolving market dynamics. The company generated $326 million of adjusted free cash flow in the third quarter and expects to generate more than $1.2 billion in adjusted free cash flow in full-year 2025. Solid growth in free cash flow highlights efficient working capital management.

However, weak demand in renewable energy, EV verticals and soft demand for consumer driven products are weighing on margin. It operates in a highly competitive environment, facing competition from Celestica, Sanmina Corporation SANM, Plexus. Sanmina is increasingly gaining traction in the healthcare and industrial market, which could pose a challenge to Jabil in those vertical.

The Case for Celestica

Celestica is witnessing growth in the Connectivity & Cloud Solutions (CCS) segment. Solid traction in the hardware platform solutions portfolio, backed by growing adoption of its networking products, including 400G switches and 800G switches, is driving revenues. Management’s strong focus on product diversification and product innovation is a positive factor. Strategic collaboration with industry leaders like AMD and Broadcom is expected to bring long-term benefits.

Its strong research and development foundations allow it to produce high-volume electronic products and highly complex technology infrastructure products for a wide range of industries. The company continuously pursues enhancing its manufacturing, engineering, design, quality and supply-chain capabilities while developing trusted relationships with leading customers. This strategy has augmented its market penetration in each of the markets CLS serves.

The company is expanding its portfolio offerings to capitalize on the growing demand for new edge IoT and edge-AI applications. It has introduced a state-of-the-art enterprise access switch ES1500, which offers up to 48 ports with 2.5 gigabit ethernet per port speed. With a fanless, 8-port compact design, the switch can support an extended temperature range, making it ideal for space-constrained deployment at an enterprise’s edge. Such innovative product launches bode well for long-term growth.

However, intensifying competition with Jabil, Sanmina, and Foxconn is straining margins. The company is exposed to significant customer concentration risk. Given the competitive nature of the industry, any changes in the demand pattern of any of the major customers can have a significant negative impact on the company’s financial results. The highly cyclical nature of the semiconductor industry is also a major concern. The company needs to make significant investments in innovation and product development to maintain its competitive edge. This also weighs on the margin.

How Do Zacks Estimates Compare for CLS & JBL?

The Zacks Consensus Estimate for Jabil’s 2025 sales implies year-over-year growth of 0.58%, while that of EPS suggests growth of 10.13%. The EPS estimates have been trending northward over the past 60 days.

The Zacks Consensus Estimate for Celestica’s 2025 sales and EPS implies year-over-year growth of 13.15% and 30.15%, respectively. The EPS estimates have remained unchanged over the past 60 days.

Price Performance & Valuation of CLS & JBL

Over the past year, Celestica has gained 152.6%, while Jabil has gained 85.2% over the same period.

Jabil looks more attractive than Celestica from a valuation standpoint. Going by the price/earnings ratio, Jabil’s shares currently trade at 20.42 forward earnings, lower than 28.98 for Celestica.

CLS or JBL: Which is a Better Pick?

While Celestica carries a Zacks Rank #3 (Hold), Jabil sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celestica and Jabil are both expected to benefit from growing AI proliferation across industries. CLS is set to benefit from healthy demand for its 400G and 800G switches. However, a broader portfolio offering, robust cash flow position and solid investment in the AI data center market give Jabil a competitive edge. Strong upward estimate revision shows growing investors’ confidence in Jabil’s prospects. With attractive valuation and a Zacks Rank #1, Jabil seems to be a better investment option at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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