Acquisitions Drive Littelfuse's Revenue and Profit Higher

By Timothy Green Markets Fool.com

Circuit protection product manufacturer Littelfuse (NASDAQ: LFUS) reported its first-quarter results before the market opened on May 3. Acquisitions drove much of its 30% revenue growth, but solid organic growth in the electronics segment contributed as well. Continued weakness in the automotive and industrial segments acted as a headwind, but the company sees conditions improving a bit going forward. Here's what investors need to know about Littelfuse's first-quarter report.

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Littelfuse results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$285.4 million

$219.4 million

30.1%

Net income

$38.9 million

$19.3 million

101.6%

GAAP EPS

$1.69

$0.85

98.8%

Adjusted EPS

$1.69

$1.38

22.5%

EPS = earnings per share. Data source: Littelfuse.

What happened with Littelfuse this quarter?

Most of Littelfuse's growth was driven by acquisitions, but organic growth was still positive.

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  • Excluding acquisitions, divestitures, and currency, organic revenue grew by 5% year over year.
  • Electronics revenue rose 56% year over year to $152.8 million. Revenue was up 15% on an adjusted basis.
  • Automotive revenue increased 17% year over year to $107.8 million. Revenue was down 2% on an adjusted basis.
  • Industrial revenue slumped 17% year over year to $23.8 million. Revenue was down 10% on an adjusted basis.
  • Electronics segment operating income jumped 57% to $32.2 million. Automotive segment operating income dropped 14% to $15.1 million. Industrial segment operating income contracted 94%, with the segment essentially breaking even.
  • Littelfuse invested an additional $15 million in start-up Monolith Semiconductor during the quarter. It now has a majority ownership position in the company.

Littelfuse provided the following guidance for the second quarter:

  • Revenue is expected between $301 million and $311 million, up 13% year over year at the midpoint.
  • Adjusted EPS is expected between $1.83 and $1.97.

Image source: Littelfuse.

What management had to say

Littelfuse CEO Dave Heinzmann discussed the good and the bad in the first quarter:

We're off to a strong start to 2017, with sales and adjusted earnings per share at the high end of our guidance range. We saw strong order rates continue through the first quarter in our electronics segment. Our automotive sales growth was negatively impacted by planned sensor product exits and challenging prior year comparisons from related last-time buys, as well as higher customer inventories. We were encouraged by sequential sales growth in both our commercial vehicle business and industrial segment, as end market weakness moderated.

Heinzmann also added some detail to the company's second-quarter guidance: "Our positive momentum has carried into the second quarter as we continue to see strong order rates across our electronics segment. With more stable trends in some heavy industrial markets, we expect stronger revenue growth to drive margin expansion for the second quarter."

Looking forward

The electronics segment continues to be the strongest performer on an adjusted basis, more than offsetting tepid sales in the automotive and industrial segments. The company does see weakness in those two segments moderating going forward, but the electronics business looks like it will be the main growth driver for the time being.

Littelfuse expects double-digit revenue growth during the second quarter, along with a significant increase in adjusted EPS. The company reported adjusted EPS of $1.44 during the second quarter of last year.

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Littelfuse. The Motley Fool has a disclosure policy.