Littelfuse (NASDAQ:LFUS), a leading provider of circuit protection products, reported its third-quarter results before the market opened on Oct. 28. While foreign exchange rates and a one-time charge knocked down revenue and profits, Littelfuse's quarter was generally solid, adjusted for these items.

Littelfuse results: The raw numbers

 

Q3 2015

Q3 2014

Growth (YOY)

Sales

$215.5 million

$217.6 million

(1%)

Net Income

$11.3 million

$29.9 million

(62%)

GAAP EPS

$0.50

$1.32

(62%)

Adjusted EPS

$1.43

$1.35

6%

Data source: Littelfuse Q3 earnings release. 

What happened with Littelfuse this quarter?
Littelfuse's third quarter was better than the headline numbers suggest:

  • Sales increased by 4% year over year, adjusted for currency effects.
  • Electrical sales increased by 8% year over year, or by 12% adjusted for currency, and accounted for 14.6% of Littelfuse's total revenue.
  • Automotive sales rose by 1% year over year, or by 8% adjusted for currency, with strong growth in Europe driving sales. Automotive accounted for 37.8% of total revenue.
  • Electronics sales declined by 5% year over year, or by 2% adjusted for currency, with capacity constraints for sensor products and a weak seasonal ramp-up for core products weighing on sales. Electronics accounted for 47.6% of total revenue.
  • A $30.2 million non-cash charge related to the company's U.S. pension plan dragged down GAAP earnings. On an adjusted basis, EPS rose by 6% year over year, with an adjusted operating margin of 19.5%.

The company also provided guidance for the fourth quarter:

  • Revenue is expected to be in the range of $212 million to $222 million, including the impact of the fourth quarter of 2015 having an extra week compared to the fourth quarter of 2014. The extra week is expected to add about $10 million to sales during the fourth quarter.
  • Adjusted earnings are expected to be in the range of $1.12 to $1.24 per share, with the extra week contributing $0.02 per share.

What management had to say
CEO Gordon Hunter praised the company's execution in a difficult environment:

Our teams continue to execute well in a generally challenging global economic environment. Our electrical business is recovering on both the top and bottom lines; automotive is beginning to make progress on its margin improvement initiatives and electronics profitability continues to be strong. Manufacturing performed well across the board, with improvements at our Piedras Negras, Mexico site particularly notable.

Looking forward, Hunter sees mixed economic signals and limited visibility, noting that order rates in the first few weeks of the fourth quarter have been weak. "At this point, we expect normal sequential declines in both sales and margins in the fourth quarter," he said.

Looking forward
Profitability improved dramatically in both the automotive and the electrical segments during the third quarter. Automotive operating income jumped 25% year over year while electrical operating income rose 79% year over year. Meanwhile, Littelfuse's electronics segment saw a 19% year-over-year decline in operating income, counteracting the improvements in the other segments.

Despite this decline, all of the company's segments enjoyed double-digit operating margins, and while there's plenty of uncertainty in the near term, according to Hunter's comments, Littelfuse nonetheless managed a solid third quarter. Margins in the electronics segment are something that investors should keep an eye on going forward, but it remains extremely profitable.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Littelfuse. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.