Key Highlights

  • Revenue rose 4.6% to USD 149.6 million, while adjusted gross margin hit a record 42.2%, up 330 basis points.
  • Adjusted diluted EPS reached a record USD 0.77 against USD 0.60, and GAAP diluted EPS was USD 0.61.
  • Management raised 2026 revenue guidance to USD 580 million to 590 million and EPS guidance to USD 2.78 to 2.88.
  • The company acquired Millar, a pressure sensing maker with about USD 30 million of revenue, for USD 50 million.

Margin Record and Raised Outlook

CTS (NYSE:CTS), a maker of sensors, connectivity components and actuators, reported third-quarter net sales of USD 149.6 million on Tuesday, up 4.6% from USD 143.0 million. Gross margin rose to 42.2% from 38.7% on end-market mix, operational improvements and a favorable currency effect of about USD 1.4 million. Operating earnings rose 22.0% to USD 25.5 million, and net earnings rose 29.7% to USD 17.8 million, or USD 0.61 per diluted share against USD 0.46.

Other income included USD 12.5 million from a representations and warranties insurance claim tied to a prior acquisition, and the effective tax rate was 53.5% against 30.6%. Adjusted EBITDA margin was 24.7%, up 90 basis points. Adjusted diluted EPS was a record USD 0.77 against USD 0.60, including about USD 0.04 from currency.

Management raised 2026 revenue guidance to USD 580 million to USD 590 million from USD 565 million to USD 585 million, and adjusted EPS guidance to USD 2.78 to USD 2.88 from USD 2.55 to USD 2.70. The full-year tax rate is guided to 20% to 22% before discrete items. The finance chief said profitability may normalize somewhat over the next few quarters after the record margin.

End Markets and Orders

Diversified end markets generated USD 89.8 million, up 7% and 60% of sales. Medical revenue rose 21% to USD 27 million, and industrial rose 7% to USD 40 million on refrigeration, HVAC and automation demand. Aerospace and defense sales were USD 24 million, up 30% sequentially but down 7% from a year earlier on the timing of government contract awards. Transportation revenue rose 2% to USD 60 million with wins in foot controls and seat track.

The book-to-bill ratio was 1.18, with diversified markets at 1.3 and aerospace and defense at 1.91. Total booked business was about USD 1.2 billion. Chief Executive Pratik Trivedi noted that global light vehicle production is forecast flat to modestly down amid tariff and demand uncertainty.

Cash, Capital and Millar

Operating cash flow was USD 43.5 million against USD 29.0 million, and free cash flow was USD 41.1 million, or 184% of adjusted net earnings, after USD 2.4 million of capital spending. Cash was USD 144 million against USD 55 million of long-term debt. The company repurchased 57,000 shares for about USD 3.4 million, leaving USD 75 million under the authorization.

On Oct. 23 the company acquired Millar Holdings, which makes pressure sensing technology for medical devices, life sciences and industrial uses, for USD 50 million net of cash and debt, funded from cash, with up to USD 20 million of contingent consideration tied to financial targets. Millar has annual revenue of about USD 30 million, and management said it projects adjusted EPS accretion in the second half of 2027.

Sensor Markers to Follow

Tracking points include adjusted gross margin against the 42.2% record, aerospace and defense orders relative to the 1.91 book-to-bill ratio, and medical revenue growth against 21%.

Further items are the Millar contribution against about USD 30 million of annual revenue, free cash flow conversion relative to 184%, and global light vehicle volumes.