CTS Returns to Form with Recovery from Japan Tsunami

by  Ken Nagy, CFA

CTS - Analyst Report designs, manufactures, assembles, and sells a broad line of electronic components and sensors. The firm also provides electronics manufacturing services primarily to original equipment manufacturers (OEMs), for the automotive, computer, communications, medical, industrial, and defense and aerospace markets. The firm was established in 1896 as a provider of high-quality telephone products and was incorporated as an Indiana corporation in February 1929. Along the way CTS had a hand in numerous technologies from the radio to the space shuttle Columbia.

CTS has two reportable segments: Electronics Manufacturing Services (EMS) and Components and Sensors.

Toyota Motor Corporation and Honda Motor Company both reported that its global vehicle production has recovered to pre earthquake and tsunami levels.

Along the same lines, the two Japanese automakers are making an effort to intensify production in the coming months in an attempt to compensate for lost time and production as a result of the disaster.

With 32 percent of CTS Corporation’s Fiscal 2010 net revenues originating from the automotive markets, the news of the Japanese automakers recovery and ramp up bodes well for CTS and its shareholders in the near future.

During the Company’s second quarter, essential Japanese customers of CTS were forced to curtail production by as much as 50 to 60 percent as a result of the impact of Japan’s disaster.

Consequently, sales of the Company’s Components and Sensors segment during Q2 decreased by 6% year over year as a result of a 10% decrease in automotive product sales.

CTS estimated that second quarter earnings were adversely affected the by approximately $6.3 million from the catastrophe.
 

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