Why CTS (CTS) Stock Is Down Today

What Happened?

Shares of electronic components manufacturer CTS Corporation (NYSE:CTS) fell 8.8% in the morning session after the company reported third-quarter results that missed profit expectations and lowered its full-year earnings forecast. The company's revenue grew 8% year-over-year to $143 million, beating analyst estimates. However, its adjusted earnings per share (EPS) of $0.60 fell short of Wall Street's consensus of $0.61 and was down from $0.63 in the same quarter last year. Adding to investor concerns, CTS provided a mixed outlook for the full year. While it slightly raised its revenue guidance to a midpoint of $540 million, it lowered its forecast for full-year adjusted EPS to a midpoint of $2.23. The results highlighted a decline in profitability, with the company's operating margin contracting to 14.6% from 16.8% a year ago.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy CTS? Access our full analysis report here.

What Is The Market Telling Us

CTS’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 18 days ago when the stock dropped 2.7% on the news that renewed worries over worsening trade relations with China were triggered by critical comments from the U.S. President. 

The remarks specifically targeted China's tightening control over rare earth metals, which are crucial components in a wide range of technology products, including defense systems and electric vehicles. The tone and the suggestion that a key diplomatic meeting might be canceled sparked a rapid sell-off in the market. Consequently, technology stocks with significant exposure to Chinese supply chains experienced sharp declines as investors weighed the potential impact of escalating trade disputes.

CTS is down 24.8% since the beginning of the year, and at $39.03 per share, it is trading 33.8% below its 52-week high of $58.97 from November 2024. Investors who bought $1,000 worth of CTS’s shares 5 years ago would now be looking at an investment worth $1,529.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.