They have been baptized, received the Holy Spirit and were infused with Sanctifying Grace when baptized (though they do not know that this baptism modified them in such a way).
That being said, that they are Catholic via baptism; they are yet participating in the protesting heresy and then excommunication of Martin Luther. (Heresy means propagating private opinions of doctrine rather than letting the Church’s Tradition of Doctrine be one’s own, since the Church only passes on what was received, and what it was authoritatively sent to deliver to the faithful - note: things such as the Augsburg Confession, Smalcald Articles, etc., are joint opinions of men opposing Orthodox Doctrine; they are not valid doctrine just because a group of German Noblemen and Clerics signed approval).
So, they are Catholics out of Communion with the Church.