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Double-Digit Organic Growth for Littelfuse

By Timothy Green – May 2, 2018 at 9:10PM

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An acquisition plus strong organic sales growth equals a big revenue and adjusted earnings boost.

Circuit-protection product manufacturer Littelfuse (LFUS 4.39%) reported its first-quarter results before the market opened on May 2. A major acquisition that closed in January drove much of the company's revenue growth, but sales grew at a double-digit rate organically as well. The bottom line soared on an adjusted basis, but GAAP (generally accepted accounting principles) earnings were hit by costs and charges related to the acquisition.

Here's what investors need to know about Littelfuse's first-quarter results.

Littelfuse results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$417.8 million

$285.4 million

46.4%

Net income

$36.0 million

$38.9 million

(7.5%)

GAAP earnings per share

$1.45

$1.69

(16.6%)

Non-GAAP earnings per share

$2.39

$1.69

41.4%

Data source: Littelfuse.

What happened with Littelfuse this quarter?

  • Excluding the impact of acquisitions, organic revenue grew by 10% year over year.
  • Electronics revenue rose 72% year over year. Organic revenue was up 10%.
  • Automotive revenue rose 17% year over year. Organic revenue was up 10%.
  • Industrial revenue rose 14% year over year. Organic revenue was up 13%.
  • Electronics segment operating income jumped 53% to $54.0 million. Automotive segment operating income rose 22% to $18.4 million. Industrial segment operating income was $4.7 million, up from essentially break-even in the prior-year period.
  • Littelfuse completed the acquisition of IXYS Corp. on Jan. 17, giving its first-quarter results a significant boost. Charges and costs related to the acquisition knocked down GAAP earnings for the quarter.
  • Littelfuse declared a $0.37 per-share dividend, payable on June 7 to shareholders of record on May 24.
  • The company has authorized a new share repurchase program allowing it to buy back one million shares, effective through April 30, 2019. The previous authorization had expired.

Littelfuse provided the following guidance for the second quarter of 2018, which includes a full quarter of IXYS results:

  • Revenue is expected between $450 million and $462 million, up 45% year over year, and up 8% organically at the midpoint of that range.
  • Non-GAAP earnings per share is expected between $2.39 and $2.53, up 17% year over year at the midpoint.
  • Littelfuse expects its adjusted effective tax rate to jump 500 basis points year over year to a range of 19.5% to 20.5%. Adjusted EPS would grow at a faster 25% rate if the tax rate were to remain unchanged.
  • For the full year, Littelfuse still expects an adjusted effective tax rate between 18% and 21%.
Littelfuse power fuses

Littelfuse power fuses. Image source: Littelfuse.

What management had to say

Littelfuse CEO Dave Heinzmann summed up the quarter: "We continued our momentum with an exceptional start to 2018. With our focus on the secular trends of a safer, greener and increasingly connected world, and consistent operational performance, we delivered sales and adjusted earnings that meaningfully exceeded our guidance."

Heinzmann also commented on the IXYS acquisition and the company's outlook:

We are off to a strong start integrating the IXYS business, and have taken initial steps to drive synergy realization. Leveraging the broad-based demand across our businesses, we expect robust top-line growth and consistent operating margins in the second quarter. We are focused on the right growth opportunities to continue executing our long-term strategy and driving double digit sales and earnings growth.

Looking forward

While most of Littelfuse's revenue growth during the first quarter was the result of the acquisition of IXYS, organic growth played a role as well. The 10% organic growth rate Littelfuse managed was more than double the 4% rate during the fourth quarter of 2017. It was also double the 5% rate reported during the prior-year period.

The IXYS acquisition will continue to drive big year-over-year increases in revenue until it's lapped early next year. Earnings growth is expected to slow down a bit during the second quarter, in part due to a higher tax rate. But the company is still predicting double-digit growth.

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

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Littelfuse, Inc. Stock Quote
Littelfuse, Inc.
LFUS
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