CTS: Diversity & Alt-Energy

CTS Setting a Course for Growth

CTS Corporation (CTS - Analyst Report) designs, manufactures, assembles and sells electronic components and sensors worldwide. Despite challenging business conditions, the firm delivered on an aggressive cost containment plan and had significant design wins during fiscal 2009. These wins should translate into meaningful revenue growth in 2010 and beyond.

Several of the new business wins are related to clean technology applications. The global movement to energy efficiency, or so-called "green technology" is prompting consumers and governments to look for other options. This should be a tailwind for CTS.

EMS: Niche markets, Diversification and Alternative Energy

The slower growing Electronics Manufacturing Services (EMS) segment has been exceptionally diversified since 2004 into medical and industrial, where margins are higher and the cost to enter the market is significant. This will likely produce higher margins and more reliable revenue in what is CTS’ largest segment. New design wins include BAE’s A3 Bradley Vehicle, Barron McCann Security and electronic vehicle charging stations, which project to approximately $58 million over the program periods.

The EMS segment (59% of sales) should see mid-single digit sales growth over 3-5 years. Corporate strategy is to find customers with complex needs in niche sectors such as defense and aerospace.

Sensors and Actuators: Potential in Emissions Regulation

The Sensors and Actuators segment has the potential to see double-digit sales growth over the next 3-5 years. Green initiatives, the need for increased fuel economy, and market share gains in Automotive provide a positive back drop for the segment.

Electronic Components

The Electronic Components segment also has the potential for double-digit sales growth over the next three to five years. Driven by growth in its communications infrastructure, the firm has been increasing market share and winning new customers.

Read the full analyst report on CTS