In This Article:
Circuit protection product manufacturer Littelfuse (NASDAQ: LFUS) reported its second-quarter results before the market opened on July 31. Revenue and adjusted earnings tumbled as trade tensions, a weak automotive market, and bloated channel inventories posed major challenges. High inventories will be a problem for the rest of the year, likely killing any chance of a significant rebound in the second half.
Littelfuse results: The raw numbers
| Metric | Q2 2019 | Q2 2018 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $397.9 million | $459.2 million | (13.3%) |
| Net income | $43.8 million | $42.3 million | (3.5%) |
| GAAP earnings per share | $1.75 | $1.67 | 4.8% |
| Non-GAAP earnings per share | $1.91 | $2.68 | (28.7%) |
Data source: Littelfuse.
What happened with Littelfuse this quarter?
-
Excluding the impact of acquisitions, divestitures, and currency, organic revenue slumped 11% year over year. The company blamed global trade uncertainties, efforts by distribution partners to reduce excess electronics channel inventories, and declines in global auto production.
-
Electronics revenue was down 13% year over year, or down 11% organically, to $259.6 million.
-
Automotive revenue was down 15% year over year, or down 12% organically, to $108.7 million.
-
Industrial revenue was down 9% year over year, or up 1% organically, to $29.7 million.
-
Electronics operating income was down 35.2% to $43.6 million; automotive operating income was down 34.1% to $10.3 million; and industrial operating income was up 10.5% to $5.8 million.
-
Adjusted earnings were significantly impacted by lower sales volumes compared to the prior-year period.
-
Littelfuse repurchased 188,214 shares of stock during the second quarter.
-
Operating cash flow was $49.2 million, and free cash flow was $38.0 million.
Image source: Littelfuse.
What management had to say
During the earnings call, Littelfuse CEO David Heinzmann gave an update on the electronics channel inventory situation:
While we have seen reduced absolute inventory levels of our product, slower end market demand resulted in a static level of weeks of inventory in the channel. As we exited the second quarter, channel inventories across most of our electronics products remained at the upper end of our normal range, which is typically 11 to 14 weeks. As a result, we expect continued softness through this year, with ongoing distributor inventory destocking.
Littelfuse's automotive business performed worse than expected during the second quarter, partially due to the company's customer base. "Japanese and Korean OEM car builds where we have the lowest levels of content were down only 1%. North American, European, and Chinese OEM car builds where we have our highest levels of the content, were down more than 10%," explained Heinzmann.