CTS NYSE: CTS reported first-quarter 2026 sales of $139 million, an 11% increase from the year-ago period, as the company cited double-digit growth in its diversified end markets and continued progress in its diversification strategy. President, CEO and Chairman Kieran O’ Sullivan said diversified sales rose 18% year-over-year, while transportation revenue increased 3% and showed “modest growth” and “stability” in the quarter.
The company posted a first-quarter book-to-bill ratio of 1.1, which O’Sullivan said was up 4% versus the first quarter of 2025. CTS also reported margin improvement and higher profitability, with adjusted diluted earnings of $0.62 per share compared with $0.44 per share in the prior-year quarter.
End-market results and booking trends
Chief Operating Officer Pratik Trivedi detailed results by end market, highlighting strong demand in medical and industrial, while noting that aerospace and defense bookings were lower year-over-year despite a “robust pipeline.”
- Medical: Sales were $25 million, up 28% year-over-year, with bookings up 18% and a book-to-bill ratio of 1.2. Trivedi said growth was broad-based, with particular strength in therapeutic applications. He also cited wins in medical ultrasound across multiple regions and a “large win” in non-invasive aesthetics.
- Aerospace and defense: Sales were $17 million, up 11% year-over-year, but book-to-bill was less than 1. Trivedi said CTS expects defense bookings to improve later in the year as government funding cycles normalize. He also said CTS was awarded a “significant underwater hull penetrator” win with a potential value of around $20 million over five years, and added two new RF filter customers focused on secure communications, SATCOM connectivity, and anti-jamming applications.
- Industrial: Sales were $37 million, up 14% year-over-year. Bookings rose 28% from the prior-year period, and book-to-bill was 1.29 versus 1.15 a year ago. Trivedi pointed to wins spanning distribution components, industrial printing, flow meter applications, and temperature-sensing applications such as heat pumps, pool and spa systems, and commercial appliances.
- Transportation: Sales were $60 million, up 3% year-over-year and up 7% sequentially. Trivedi said the results “appear to demonstrate early signs of stability.” He also said qualification of CTS’ next-generation Smart Actuator is progressing and that the company plans further enhancements later in 2026. Total “book business” in transportation was approximately $1.1 billion at quarter-end, according to Trivedi.
On the transportation side, Trivedi described a mix of new business wins across sensors and foot controls, including an accelerometer award from a North American OEM and current-sensing business that supports electrified vehicle architectures. O’Sullivan also said CTS secured multiple transportation awards, including current sensing in Europe and a larger foot controls award with a European OEM in early April, and added a new transportation customer.
Margins, earnings, and cash flow
CFO Ashish Agrawal said adjusted gross margin was 39.5% in the quarter, up 250 basis points year-over-year and up 40 basis points sequentially. He attributed the year-over-year improvement to operational gains and favorable end-market mix. Foreign exchange benefited sales by $3 million and added about $700,000 to gross margin, Agrawal said.
Diluted GAAP EPS was $0.59 versus $0.44 a year earlier, while adjusted diluted EPS was $0.62 compared to $0.44, according to Agrawal.
CTS generated $17 million in operating cash flow in the first quarter and ended the period with $91 million in cash and $63 million of borrowings on its credit facility. Agrawal said debt increased by about $5 million during the quarter, driven by typical first-quarter cash outflows such as incentive compensation payments, continued share repurchases, and slightly higher capital expenditures. He added that the company has “almost fully paid down the borrowings from the SyQwest acquisition at this point.”
In capital returns, CTS repurchased 177,000 shares for about $9 million and returned $10 million total to shareholders through dividends and buybacks. The company has $82 million remaining under its current repurchase authorization, Agrawal said.
Cost pressures and tariffs
Management discussed multiple cost items it is monitoring, including precious metals inflation and more recent cost pressure tied to oil-derived inputs such as resin and epoxy, along with transportation costs. Agrawal said the company is also evaluating the impact of Section 232 tariff changes on steel and aluminum.
While acknowledging potential headwinds and timing effects, Agrawal said CTS is working with customers and suppliers with the goal of keeping the impact “cost neutral” on margins.
The company’s first-quarter tax rate was 20.7%, which Agrawal said was slightly better than expected due to earnings mix and discrete items. For the full year, CTS expects a tax rate in the range of 21% to 23%.
2026 outlook and market expectations
For full-year 2026, CTS narrowed its guidance range, assuming “the continuation of current market conditions,” O’Sullivan said. The company now expects:
- Sales: $560 million to $580 million
- Adjusted diluted EPS: $2.35 to $2.45
O’Sullivan said demand in diversified end markets is expected to remain solid. He pointed to continued medical momentum, aerospace and defense revenue growth supported by backlog and the normalization of government funding, and “solid” industrial OEM and distribution sales. He also said CTS is monitoring potential economic impacts from geopolitical conflicts in the second half of the year.
In transportation, O’Sullivan said production volumes are expected to be down given geopolitical uncertainty and potential economic effects, noting IHS forecasts that global light vehicle volumes could soften. He cited expectations for North American light vehicle volumes in the “15 million unit range,” Europe in the “16 million–17 million unit range,” and China at roughly “32 million” units. Trivedi added that the commercial vehicle market is expected to grow, citing rising freight rates, improving pricing, and a pre-buy ahead of emissions regulation changes in 2027.
During Q&A, O’Sullivan said there was no revenue pulled forward into the first quarter from the second. Management also discussed margin differences among end markets, with Agrawal saying diversified end markets generally have better margins than transportation, and that medical is the strongest margin end market. O’Sullivan said improved earnings quality aligns with the company’s strategy to grow diversified markets.
On medical capacity expansion, O’Sullivan said capacity additions primarily relate to aesthetics applications, where long-term customer forecasts support installing capacity ahead of demand. He said CTS expects double-digit year-over-year sales growth in medical and does not see concerns about meeting demand.
On M&A, O’Sullivan said the company remains active in pursuing strategic acquisitions to support diversification and earnings quality, while emphasizing organic growth investments and returning cash to shareholders. “While we’ve nothing to report today, we’re very active in that area,” he said.
Closing the call, O’Sullivan reiterated diversification as a strategic priority for growth and margin expansion and said the company is also expanding “in-vehicle powertrain agnostic solutions.” He said CTS’ Evolution 2030 initiative is guiding its emphasis on growth, operational rigor, employee engagement, and community support.
About CTS NYSE: CTS
CTS Corporation NYSE: CTS is a global manufacturer and supplier of electronic components and sensors, headquartered in Lisle, Illinois. Established in 1896 as the Chicago Telephone Supply Company, the firm has evolved over more than a century to become a diversified provider of high-precision products for a wide range of end markets.
The company's core business encompasses the design, development and production of sensors and actuators, frequency control devices such as quartz crystals and filters, multilayer ceramic capacitors, and inductive components.
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