JPMorgan Upgrading CTS

From Analyst Kevin Kessel
We are upgrading shares of CTS from Underweight to Neutral. Since 10/22/08, shares have fallen 48% versus a 9% decline in the S&P 500 and an 11% decline in the Nasdaq. More importantly, the decline has meant that CTS' risk/reward profile is no longer as unattractive which was the primary reason behind our initial downgrade. Other recent positive developments include broad insider buying and the proactive handling of the $60M convert. While we acknowledge the company still has challenges ahead, we now feel they are adequately discounted in the stock price and the overall risk/reward is more balanced. Our target price is being reduced to $6 from $7 which represents the average of our NTM EPS and price/tangible book valuation analysis. For NTM EPS we use 10x our CY09 EPS est of $0.30. For price/tangible book we use 1.2x tangible book which is the average of CTS' 3 year trough and average multiples.