Littelfuse (LFUS -0.71%) reported its second-quarter earnings before market open on July 29. The company beat analyst estimates for earnings while falling slightly short on revenue, although currency headwinds had a major negative effect on revenue growth.

Littelfuse reported revenue of $222 million, up just 1% year over year, but up 6% adjusted for currency effects. Analysts expected it to be about $4 million higher, and revenue was at the low end of the company's previous guidance. It was a small miss on revenue, and currency is certainly playing a big role.

Non-GAAP EPS, adjusted for some one-time charges, came in at $1.33, six cents higher than analysts predicted and 6% higher than the same period last year.

A weak euro and some sluggishness
Littelfuse's largest segment, electronics, was sluggish during the second quarter, posting a 4% year-over-year revenue decline, or a 1% decline adjusting for currency. The company blamed a slower seasonal ramp-up for its core products, as well as capacity constraints for its sensor products.

Overall, CEO Gordon Hunter was happy with the company's performance: "Execution was excellent across our businesses in the second quarter. This enabled us to outperform our earnings guidance despite the continuing negative effects of the weak euro and some sluggishness in our electronics markets. Improved manufacturing performance at our Piedras Negras, Mexico site was particularly encouraging."

Littelfuse's other segments performed much better. Automotive sales increased by 5% year over year, or 13% adjusted for currency, and all three of the company's regions saw double-digit constant-currency growth. Electrical sales also grew, up 6% year over year, or up 9% adjusted for currency.

The electronics segment accounted for roughly 47% of total sales during the quarter, with automotive and electrical comprising 39% and 14%, respectively, of revenue.

Electronics is also the most profitable segment, accounting for more than 60% of the company's operating profit during the quarter. A big jump in operating profit from the electrical segment, coupled with a smaller jump from the automotive segment, more than counteracted the 14% decline in electronics operating profit, leading to a 7% increase in total operating profit year over year.

In addition to reporting earnings, Littelfuse announced an increase in its quarterly dividend. The next dividend payment, payable on Sept. 3, will be $0.29 per share, a 16% increase over the previous $0.25 quarterly payment.

According to CFO Phil Franklin, more major dividend increases could be coming in the future: "Since the dividend was initiated in 2010, we have increased it at a compound annual growth rate of 15%. As previously indicated, we will be revisiting our capital allocation targets in the coming months and, if M&A activity does not pick up, will increase the percentage of free cash returned to shareholders."

Littelfuse expects currency to continue to be a major issue during the third quarter. Revenue is forecast to be between $211 million and $221 million, which is flat year over year at the midpoint of that range and up 4% on a constant-currency basis. EPS is expected to be between $1.24 and $1.36, which includes about $0.10 in negative currency effects compared to the same period last year.

Hunter had this to say about the third-quarter outlook: "There are mixed signals regarding the near term outlook. The .94 book to bill indicates less- than-normal seasonal strength for electronics, although we did see this increase some in July. On the other hand, the electrical business continues to improve and automotive trends remain solid despite slowing growth in global car production."

Overall, Littelfuse had a decent quarter, with currency effects and some weakness in its electronics business hurting the company's results. Both the automotive and electrical segments are performing well, though, making up for falling profits elsewhere, and while the short-term outlook may be disappointing, investors should be focused on the long-term potential of the company.