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Bear of the Day: Littelfuse, Inc. (LFUS)

Benjamin Rains

Littelfuse (LFUS) stock has slipped roughly 6% since the company reported its first-quarter fiscal 2019 financial results on May 1. The circuit protection firm fell short of top-line estimates and it is projected to see its full-year revenue and earnings head in the wrong direction.

Overview

Littelfuse makes circuit protection, power control, and sensing technologies. Its offerings are sold in over 150 countries and can be found in everything from vehicles to medical devices and consumer electronics. The company boasts a market cap of $4.42 billion, and its shares have an average volume of 152,937.

As we mentioned at the top, the Chicago-based company topped quarterly earnings estimates. The firm reported adjusted quarterly earnings of $1.96 per share, which came in $0.03 above our $1.93 per share Zacks Consensus Estimate. However, this still marked an approximately 18% drop off compared to the year-ago period. Meanwhile, the company’s Q1 sales fell 3% to hit $405.5 million, with its automotive unit revenue down 10%.

Littelfuse CEO Dave Heinzmann said in prepared remarks that the firm anticipates soft demand to persist. With that said, the chief executive also noted that Littelfuse executives “continue to expect improving conditions in the second half of the year. We remain confident we will deliver exceptional value for our shareholders by executing on our five-year growth strategy.”

Shares of LFUS closed regular trading Thursday down marginally to $178.66 per share. This marked a 25% downturn compared to its 52-week intraday high of $238.11 a share.

 

 

Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate calls for the company’s second-quarter 2019 revenue to fall 9.3% to reach $416.5 million. For the full-year, Littelfuse is projected to see its revenue fall 3.2% to $1.66 billion. Peeking even further down the road, it is worth noting that the company’s 2020 sales are expected to climb 4.5% above our current year estimate to inch by its 2018 total of $1.72 billion.

At the bottom end of the income statement, LFUS’s adjusted Q2 EPS figure is projected to sink roughly 22.4% to touch $2.08 per share. The company’s full-year earnings are expected to fall by 7.7%. Similarly, Littelfuse’s adjusted full-year 2020 earnings are expected to come in nearly 14% higher than our 2019 projection. This growth would help it top 2018’s full-year earnings.

Clearly, the company’s current-year outlook appears less than inspiring. Plus, Littelfuse has seen some negative earnings estimate revision activity recently. This helped send its overall earnings estimates down in a big way, as we can see in the chart below.  

 

 

Bottom Line

Littelfuse is a Zacks Rank #5 (Strong Sell) at the moment, based, in large part, on recent earnings estimate revision activity. The company also sports a “D” grade for Value and an “F” for Momentum in our Style Scores system. LFUS’ price/sales ratio of 2.6 comes in above its industry’s 1.5 average. The stock’s forward P/E of 20.6X also marks a premium compared to its industry’s 17.6X average.

Therefore, investors might want to stay away from Littelfuse for now. Yet, the company does look poised to return to growth in fiscal 2020 and it has been a strong performer over the last five years. Therefore, some investors might want to bookmark LFUS stock and come back later.

Investors still interested in the Miscellaneous Components industry might instead turn to OSI Systems, Inc. (OSIS), Rogers Corporation (ROG), Universal Display Corporation (OLED), Gardner Denver Holdings, Inc. (GDI), and TE Connectivity Ltd. (TEL), which are all currently Zacks Rank #1 (Strong Buy) or #2 (Buy) stocks at the moment.

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