A Bottom-Line Surge for Littelfuse

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Manufacturer of circuit-protection products Littelfuse (NASDAQ: LFUS) reported its second-quarter results before the market opened on Aug. 2. The report featured solid double-digit revenue growth, driven by strong organic growth, acquisitions, and a surge in the bottom line. The company does see a slowdown coming in its largest segment, but it still expects double-digit revenue and earnings growth during the third quarter. Here's what investors need to know about Littelfuse's results.

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Littelfuse results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$313.4 million

$271.9 million

15.3%

Net income

$48.6 million

$27.2 million

78.7%

GAAP EPS

$2.11

$1.20

75.8%

Non-GAAP EPS

$2.10

$1.44

45.8%

What happened with Littelfuse this quarter?

  • Excluding acquisitions, divestitures, and currency effects, organic revenue grew by 11% year over year.
  • Electronics revenue soared 28% year over year to $169.4 million. Revenue was up 16% on an adjusted basis.
  • Automotive revenue rose 5% year over year to $116.5 million. Revenue was up 6% on an adjusted basis.
  • Industrial revenue slumped 3% year over year to $27.5 million. Revenue was up 5% on an adjusted basis.
  • Electronics segment operating income surged 70% to $43.0 million. Automotive segment operating income dropped 5% to $15.7 million. Industrial segment operating income dropped 6% to $1.9 million.
  • The company announced that it had acquired the assets of U.S. Sensor Corporation, a manufacturer of temperature sensors.
  • Littelfuse declared a quarterly dividend of $0.37 per share, an increase of 12%. The dividend is payable on Sept. 7 to shareholders of record on Aug. 24.

Littelfuse provided the following guidance for the third quarter:

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  • Third-quarter revenue is expected to be between $311 million and $323 million, up 13% year over year at the midpoint, and up 9% on an adjusted basis.
  • Third-quarter non-GAAP EPS is expected to fall between $2.02 and $2.16.

What management had to say

In a press release, Littelfuse CEO Dave Heinzmann discussed the drivers behind the strong second quarter, which followed an equally impressive first quarter:

We followed our strong first quarter performance with record sales and earnings in the second quarter. ... The strong order rates we've seen across our electronics segment since late last year continued in the second quarter, and along with solid operational execution, drove record performance across electronics. Our automotive and industrial segments also performed well, which included the expected profitability improvement in industrial.

Heinzmann warned investors about a slowdown in order rates that could impact the third-quarter results:

While electronics order rates remain strong, they have slowed from the peak in the second quarter. We continue, however, to see robust end demand and expect the momentum in electronics sales to continue in the third quarter. ... We also expect the automotive and industrial segments to have another solid growth quarter, including margin expansion in both businesses.

Looking forward

The electronics segment drove much of Littelfuse's revenue growth and all of its earnings growth during the second quarter. Both the automotive and industrial segments grew on an adjusted basis, but the company's biggest segment was the star of the show.

The electronics segment managed an operating margin of 25%, a number that may not hold up during the third quarter given the slowdown in orders. The company expects to produce solid revenue growth despite this headwind, although adjusted earnings will grow more slowly. The company produced non-GAAP EPS of $1.87 during the third quarter of 2016, so the earnings guidance represents EPS growth of just 11.7% at the midpoint.

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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.