Electronic components manufacturer CTS Corporation (NYSE:CTS) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 7.7% year on year to $137.3 million. The company’s full-year revenue guidance of $565 million at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $0.62 per share was 3.3% above analysts’ consensus estimates.
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CTS (CTS) Q4 CY2025 Highlights:
- Revenue: $137.3 million vs analyst estimates of $135.9 million (7.7% year-on-year growth, 1% beat)
- Adjusted EPS: $0.62 vs analyst estimates of $0.60 (3.3% beat)
- Adjusted EBITDA: $32.6 million vs analyst estimates of $32.48 million (23.7% margin, in line)
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.38 at the midpoint, missing analyst estimates by 1%
- Operating Margin: 16.5%, in line with the same quarter last year
- Market Capitalization: $1.66 billion
StockStory’s Take
CTS Corporation’s fourth quarter was marked by a positive market response, driven by strong execution of its diversification strategy and momentum in non-transportation end markets. Management highlighted that diversified segments, particularly medical and industrial, delivered robust revenue gains, offsetting flat transportation sales. CEO Kieran O’Sullivan attributed performance to the company’s focus on advanced sensing technologies and operational improvements, stating, “Our diversified end markets were up 16% versus the prior year period.” Medical applications, especially in therapeutic and diagnostic devices, stood out as key contributors, while ongoing gross margin expansion reflected both product mix and process enhancements.
Looking ahead, CTS expects continued growth in its diversified end markets to underpin guidance, with management pointing to expanded capacity in medical therapeutics and a growing industrial pipeline. CEO O’Sullivan emphasized a commitment to product innovation, new customer wins, and further integration of advanced sensing technologies, saying, “We are working closely with leading medical device manufacturers to integrate our advanced sensing technologies into their platforms.” While transportation remains challenged by flat global vehicle production forecasts and tariff impacts, the company is banking on new product introductions and improved government funding cycles, particularly within defense and aerospace, to support its outlook for the coming year.
Key Insights from Management’s Remarks
Management attributed the fourth quarter’s strength to medical and industrial momentum, a higher mix of diversified end markets, and new product wins, while also highlighting margin gains from operational improvements.
- Medical segment acceleration: CTS saw a 41% increase in medical sales year-over-year, with strong bookings driven by demand for therapeutic and diagnostic devices. Management cited progress in minimally invasive applications and ongoing partnerships with leading device manufacturers.
- Industrial market recovery: The industrial segment posted a 16% sales increase, reflecting stabilizing OEM demand and distribution recovery. Management highlighted wins in temperature and frequency sensing applications supporting energy efficiency and automation.
- Transportation remains mixed: Transportation sales were essentially flat, but the company secured approximately $100 million in new business awards, including accelerator modules and floor hinge technology for electric vehicle (EV) applications. Management noted that new product launches in this area will contribute to revenue in future years rather than immediately.
- Aerospace and defense visibility: Although Q4 sales declined due to program timing, full-year defense revenue grew 20%. CTS secured multiple orders for naval sonar and RF filters, with management expecting government funding normalization to benefit results in the coming year.
- Margin improvement through diversification: Gross margin expanded by 150 basis points, attributed to greater revenue from non-transportation markets and operational improvements. Management emphasized that the shift toward higher-value, diversified products continues to support profitability.
Drivers of Future Performance
CTS expects solid growth in diversified end markets and ongoing product innovation to drive performance, while monitoring transportation softness and potential tariff or supply chain headwinds.
- Medical and industrial momentum: Management believes that continued demand for therapeutic and diagnostic solutions, alongside industrial automation trends, will support revenue and margin growth. Expanded capacity and deeper customer collaboration in these areas are expected to be key drivers.
- Transportation market uncertainties: The company anticipates flat to slightly down transportation volumes due to global light vehicle production forecasts, tariffs, and consumer demand. However, new product awards and a pipeline of EV-focused solutions may offset some of the softness in the sector.
- Defense and government funding cycles: Management expects aerospace and defense to benefit from improved government funding and backlog, particularly through its SideQuest operation. The pace of new contract awards and execution in this area is seen as a potential catalyst for incremental growth.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will be watching (1) the continued acceleration of medical and industrial sales as a sign of sustained diversification progress, (2) the pace of recovery in government-related defense revenues, especially as funding cycles normalize, and (3) signs of stabilization or improvement in transportation, particularly from new EV-focused product launches. The impact of tariffs and supply chain dynamics, as well as execution on new customer programs, will also be important factors to monitor.
CTS currently trades at $57.36, up from $55.58 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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