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Littelfuse Posts 11% Organic Growth

Timothy Green, The Motley Fool

Circuit-protection product manufacturer Littelfuse (NASDAQ: LFUS) reported its second-quarter results before the market opened on Aug. 1. Revenue soared thanks to the acquisition of IXYS and double-digit organic growth, while adjusted earnings grew at a slower rate. The company provided guidance calling for strong growth in the third quarter, despite the impact from tariffs.

Here's what investors need to know about Littelfuse's second-quarter report.

Littelfuse results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$459.2 million

$313.4 million

46.5%

Net income

$42.3 million

$48.6 million

(13%)

GAAP earnings per share

$1.67

$2.11

(20.9%)

Non-GAAP earnings per share

$2.68

$2.10

27.6%

Data source: Littelfuse. 

What happened with Littelfuse this quarter?

  • Excluding the impact of acquisitions, organic revenue grew by 11% year over year.
  • Electronics revenue rose 77% year over year, 14% organically.
  • Automotive revenue jumped 9% year over year, 5% organically.
  • Industrial revenue climbed 19% year over year, 18% organically.
  • Electronics segment operating income was $67.3 million, up 57% year over year. Automotive segment operating income was flat. Industrial segment operating income soared 177% year over year to $5.3 million.
  • Littelfuse exited its custom business within the industrial segment during the second quarter. The company doesn't expect this move to materially affect future sales or earnings.
  • Littelfuse declared a quarterly dividend, payable on Sept. 6 to shareholders of record on Aug. 23, of $0.43. That's a 16% increase over the previous dividend.

Littelfuse provided the following guidance for the third quarter:

  • Revenue is expected between $434 million and $446 million. That represents 38% year-over-year growth at the midpoint, and organic growth of 8%.
  • Non-GAAP earnings per share is expected to be between $2.31 and $2.45, up 13% year over year at the midpoint.
  • Littelfuse expects its adjusted effective tax rate to be roughly 21%. For the full year, an adjusted effective tax rate between 18% and 21% is anticipated.
Littelfuse fuses.

Image source: Littelfuse.

What management had to say

During the conference call, Littelfuse CEO Dave Heinzmann discussed the company's progress in the Internet of Things market: "The Internet of Things continues to be a key driver for our business, as we saw innovative design wins in the quarter for products used across a wide range of connected devices. We secured design wins for a line of smart smoke detectors and digital security cameras, as well as robotic vacuum cleaners and smart barcode readers."

Heinzmann laid out what products tariffs will affect: "The recently implemented U.S. tariffs on China imports affects products across our electronic segment and a small number of products within our other segments."

CFO Meenal Sethna talked about expected impact of those tariffs: "Our guidance also includes the impacts from the recently implemented Section 301 China tariff, which we generally expect to be neutral to earnings. We'll provide an update on any future impacts in subsequent quarters."

Looking forward

The acquisition of IXYS was responsible for most of Littelfuse's revenue growth during the quarter, but organic growth still clocked in at 11%. That's up from 10% growth during the first quarter.

Littelfuse doesn't expect much impact from the tariffs that have been implemented so far, but a full-blown trade war that touches a much wider swath of products could change the story. Littelfuse does expect organic growth to slow down a bit during the third quarter, and adjusted earnings will grow much slower than revenue thanks in part to a higher tax rate. But overall, the company's guidance was solid.

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