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Analyst Blog

On Oct 8, Zacks Investment Research upgraded CTS Corporation (CTS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The upgrade was primarily based on CTS’s recent restructuring process combined with the company’s strategy to dissolve its non-performing entities like the Electronics Manufacturing Solutions (EMS) business. CTS’s shares reached a new 52-week high of $15.74 on Sep 27, reflecting a 53.82% increase in a year. The company delivered positive earnings surprises in two of the last 4 quarters with an average beat of 4.79%.

In Jun 2013, CTS had announced its restructuring plan to consolidate its manufacturing facilities to fewer locations with an aim to improve company’s cost structure and capacity utilization. This will help the company easily manage and better concentrate on its manufacturing facilities while allowing for sufficient growth capacity.

In the second quarter of fiscal 2013, the company saved about $2 million pretax through these actions. The company expects to save about $10 million annually after the complete implementation of the plan in 2014.

CTS reported fiscal second-quarter 2013 results on Jul 22. Revenues were up 1% sequentially. Though the weak performance of the EMS business led to reduced 2013 sales guidance of 6%-8%, the company’s earning guidance remained unchanged.  

CTS’s announcement on Oct 3 to sell its EMS business is a positive and is expected to increase the company’s financial flexibility leading to increased growth opportunities for the company.

The Zacks Consensus Estimate for fiscal 2013 has increased 2.9% to 79 cents per share as some estimates were revised higher over the last 90 days. The current estimate is within the guidance range provided by CTS Corporation.

Other Stocks to Consider

Investors can also consider other stocks that are doing well right now. These include Fabrinet (FN - Snapshot Report), Nidec Corp. (NJ - Snapshot Report) and AAC Technologies Holdings Inc. (AACAY). While Fabrinet and Nidec Corporation carry a Zacks Rank #1 (Strong Buy), AAC Technologies has a Zacks Rank #2 (Buy).

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