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Electronic component provider Littelfuse (NASDAQGS:LFUS) announced better-than-expected results in Q2 CY2024, with revenue down 8.7% year on year to $558.5 million. On the other hand, next quarter's revenue guidance of $555 million was less impressive, coming in 1.9% below analysts' estimates. It made a non-GAAP profit of $1.97 per share, down from its profit of $3.12 per share in the same quarter last year.
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Littelfuse (LFUS) Q2 CY2024 Highlights:
- Revenue: $558.5 million vs analyst estimates of $540.4 million (3.4% beat)
- EPS (non-GAAP): $1.97 vs analyst estimates of $1.76 (12.3% beat)
- Revenue Guidance for Q3 CY2024 is $555 million at the midpoint, below analyst estimates of $565.5 million
- EPS (non-GAAP) Guidance for Q3 CY2024 is $2.05 at the midpoint, below analyst estimates of $2.34
- Gross Margin (GAAP): 37.1%, down from 38.4% in the same quarter last year
- Free Cash Flow of $50.3 million, up 20.9% from the previous quarter
- Market Capitalization: $6.44 billion
The developer of the first blade-type automotive fuse, Littelfuse (NASDAQGS:LFUS) provides electrical protection and control components for the automotive, industrial, electronics, and telecommunications industries.
Electronic ComponentsLike many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Unfortunately, Littelfuse's 6.3% annualized revenue growth over the last five years was mediocre. This shows it couldn't expand in any major way and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Littelfuse's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 2.2% annually. Littelfuse isn't alone in its struggles as the Electronic Components industry experienced a cyclical downturn, with many similar businesses seeing lower sales at this time.
We can dig further into the company's revenue dynamics by analyzing its most important segments, Electronics and Automotive, which are 54.7% and 30.3% of revenue. Over the last two years, Littelfuse's Electronics revenue (fuses and switches) averaged 5.7% year-on-year declines. On the other hand, its Automotive revenue (trucks, commercial machinery, marine) averaged 5.5% growth.
This quarter, Littelfuse's revenue fell 8.7% year on year to $558.5 million but beat Wall Street's estimates by 3.4%. The company is guiding for a 8.6% year-on-year revenue decline next quarter to $555 million, a deceleration from the 7.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 2.9% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Littelfuse has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 15.8%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Littelfuse's annual operating margin rose by 4.2 percentage points over the last five years, showing its efficiency has improved.
This quarter, Littelfuse generated an operating profit margin of 11.7%, down 3.3 percentage points year on year. Since Littelfuse's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Littelfuse's EPS grew at a weak 1.1% compounded annual growth rate over the last five years, lower than its 6.3% annualized revenue growth. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Littelfuse, its two-year annual EPS declines of 27% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Littelfuse reported EPS at $1.97, down from $3.12 in the same quarter last year. Despite falling year on year, this print easily cleared analysts' estimates. Over the next 12 months, Wall Street expects Littelfuse to grow its earnings. Analysts are projecting its EPS of $8.72 in the last year to climb by 17.2% to $10.22.
Key Takeaways from Littelfuse's Q2 Results We were impressed by how significantly Littelfuse blew past analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its revenue and EPS guidance for next quarter were both underwhelming and below Wall Street's estimates. Overall, this quarter seemed fairly positive, but the guidance was a major negative that could weigh on the stock. The stock remained flat at $258.58 immediately following the results.
