CTS (NYSE:CTS) Beats Q3 Sales Expectations

Electronic components manufacturer CTS Corporation (NYSE:CTS) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 8% year on year to $143 million. The company’s full-year revenue guidance of $540 million at the midpoint came in 1.8% above analysts’ estimates. Its non-GAAP profit of $0.60 per share was 1.6% below analysts’ consensus estimates.

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“Our business had another quarter of strong growth with sales up 22% year over year in the diversified end markets. The CTS team executed well in a challenging environment achieving solid profitability and strong cash generation,” said Kieran O’Sullivan, CEO of CTS Corporation.

Company Overview

With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE:CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $531.5 million in revenue over the past 12 months, CTS is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, CTS’s sales grew at a decent 5% compounded annual growth rate over the last five years. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. CTS’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 3.3% over the last two years.

This quarter, CTS reported year-on-year revenue growth of 8%, and its $143 million of revenue exceeded Wall Street’s estimates by 4.8%.

Looking ahead, sell-side analysts expect revenue to grow 5.7% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

CTS has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 15.2%.

Analyzing the trend in its profitability, CTS’s operating margin rose by 26 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, CTS generated an operating margin profit margin of 14.6%, down 2.1 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

CTS’s EPS grew at an astounding 15.1% compounded annual growth rate over the last five years, higher than its 5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into CTS’s earnings to better understand the drivers of its performance. As we mentioned earlier, CTS’s operating margin declined this quarter but expanded by 26 percentage points over the last five years. Its share count also shrank by 8.9%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For CTS, its two-year annual EPS declines of 3.5% mark a reversal from its (seemingly) healthy five-year trend. We hope CTS can return to earnings growth in the future.

In Q3, CTS reported adjusted EPS of $0.60, down from $0.63 in the same quarter last year. This print slightly missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects CTS’s full-year EPS of $2.14 to grow 12.1%.

Key Takeaways from CTS’s Q3 Results

We enjoyed seeing CTS beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its EPS missed and its full-year EPS guidance fell slightly short of Wall Street’s estimates. Overall, this print was mixed. The stock remained flat at $42.45 immediately following the results.

Is CTS an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.