Sign in

    Littelfuse Inc (LFUS)

    You might also like

    Business Description

    Littelfuse, Inc. is a diversified industrial technology manufacturing company founded in 1927. It is dedicated to empowering a sustainable, connected, and safer world by designing and delivering innovative, reliable solutions. Littelfuse operates across more than 20 countries and partners with over 100,000 end customers to provide products found in various industrial, transportation, and electronics end markets .

    1. Electronics Segment - Offers a broad range of products including fuses, resettable fuses, switches, interconnect solutions, suppressors, varistors, magnetic sensing, gas discharge tubes, and semiconductor products like TVS diodes, thyristors, MOSFETs, and IGBTs .
    2. Transportation Segment - Supplies circuit protection and sensing technologies to global automotive OEMs, Tier One suppliers, and the automotive aftermarket, with a focus on passenger and commercial vehicles .
    3. Industrial Segment - Designs and sells industrial fuses, controls, and sensors for applications such as renewable energy, industrial safety, and electric vehicle infrastructure .

    Q3 2024 Summary

    Initial Price$257.20June 28, 2024
    Final Price$264.31September 28, 2024
    Price Change$7.11
    % Change+2.76%

    What went well

    • Robust design activity continues across all segments, with positive signs for future growth in automotive and electronics, despite some delays in conversion from design-in to production. , ,
    • The company is focusing on cost reduction initiatives and operational improvements, including footprint work and restructuring actions, with an expectation to drive margin expansion in 2025.
    • Strong growth drivers in the Industrial segment from data center applications (which continue to be robust), industrial safety (leadership position and continued growth driver), and HVAC showing early stages of growth.

    What went wrong

    • 1. Softening demand and cautious customer behavior in industrial markets:*
    • The company observed continued soft demand trends in industrial markets, particularly in Europe and China, with customers being cautious about investment levels. Customers are placing more last-minute orders with shorter lead times, demonstrating uncertainty and a desire to minimize inventory levels. Interest rates are not conducive to investment, further impacting demand.
    • 2. Temporary factors contributing to recent margin improvements:*

    Q&A Summary

    1. Electronics Segment Outlook
      Q: What's the outlook for Electronics, especially power semiconductors?
      A: The Electronics segment faces two different situations. For passives and protection semiconductors, channel inventories are healthy, and point-of-sale demand is stable, leading to normal seasonality into Q4. However, power semiconductors are challenged by slowing industrial demand, particularly in Europe, with meaningful slowdowns in machine automation. The visibility on improvement is challenging due to geopolitical dynamics, but we feel we're finding the bottom and expect end-market improvement over 2025.

    2. Margin Outlook
      Q: Can we expect margins to remain strong into next year?
      A: In Q3, Transportation and Industrial segments benefited from one-offs, including a 200 basis points margin tailwind from a weaker Mexican peso. While it's uncertain if these benefits will continue, we feel confident about sustaining margins and expect continued progress with margin expansion into 2025 through footprint optimization, cost reductions, and recovering volumes.

    3. Pricing Environment
      Q: Are you facing pricing pressure amid tough demand?
      A: Despite a tougher demand environment, our prior pricing increases have remained sticky and stable. While a normalized pricing environment has returned with typical year-over-year price declines in Electronics and some Industrial, we've actively worked to drive pricing up in Transportation to address cost and profitability concerns. Overall, we're comfortable with current pricing levels.

    4. Industrial Segment Growth Drivers
      Q: What drove growth in the Industrial segment this quarter?
      A: Growth was driven by robust demand in data center applications, continued strength in industrial safety, where we hold a leadership position, and a turning point in HVAC, which is beginning to show growth after several down quarters. We see significant opportunities in Industrial for long-term growth.

    5. Design Activity and Conversion
      Q: Are design wins translating into growth despite flat markets?
      A: Design-in activity remains solid across all segments, with customers continuing to develop next-generation products. While the conversion from design-in to production is taking longer due to cautiousness as customers focus on current products, these design wins will slowly add to growth over time. Overall, signs are positive for design activities.

    6. Capital Allocation and M&A
      Q: What's your outlook on M&A activity in 2025?
      A: Thoughtful M&A is critical to our long-term strategy. We're actively pursuing opportunities that diversify our markets and drive higher organic growth. While timing can be unpredictable, we expect to find acquisitions over the next 12 months, though nothing specific to announce now.

    7. Inventory Levels in Power Semiconductors
      Q: How are power semiconductor inventories and when will they normalize?
      A: We have less distribution exposure in power semiconductors, with an even mix of direct and distribution sales. We don't see excess inventories with channel partners, but industrial customers may have inventory overhangs in components and finished goods, dampening the industrial segment. Normalization will depend on end-customer demand clearing.

    8. Industrial Demand Softness
      Q: Is industrial demand softness due to cautiousness or demand?
      A: The softness is more pronounced in Europe and China, with North America being stable. Customers are cautious about factory investments, influenced by higher interest rates. We observe cautious ordering patterns, with more late and last-minute orders, indicating a preference to keep inventories low at fiscal year-end.

    9. Actions to Improve Electronics Margins
      Q: Can you improve Electronics margins despite lower revenue?
      A: Volume significantly impacts margins; Q3 benefited from strong volume, with sales at a four-quarter high. With a normal seasonal sales decline in Q4, margins may be pressured. However, we're focusing on cost reductions, including footprint optimization and restructuring, aiming for margin expansion in 2025.

    10. Design Win Sizes
      Q: Any changes in design win dollar values?
      A: Our business typically secures incremental wins—"singles and doubles" rather than "home runs". We've not seen significant shifts in win sizes; they remain consistent. The only change is a slightly elongated cycle from design win to production, which we view as an environmental, temporary situation.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    David W. HeinzmannPresident and Chief Executive Officer1985David W. Heinzmann began his career at Littelfuse in 1985 as a manufacturing engineer. He has held various positions, including Vice President, Global Operations, and Chief Operating Officer, before becoming CEO in January 2017 .
    Meenal A. SethnaExecutive Vice President and Chief Financial Officer2015Meenal A. Sethna joined Littelfuse in 2015 as Senior Vice President of Finance and became CFO in 2016. She previously worked at Illinois Tool Works Inc. as Vice President and Corporate Controller .
    Ryan K. StaffordExecutive Vice President, Mergers & Acquisitions, Chief Legal Officer2007Ryan K. Stafford joined Littelfuse in 2007 as General Counsel and Chief Human Resources Officer. He became Corporate Secretary in 2017 and assumed his current role in 2021 .
    Maggie ChuSenior Vice President and Chief Human Resources Officer2021Maggie Chu joined Littelfuse in June 2021. She previously worked at Caterpillar, Inc. and General Electric Company in various HR leadership roles .
    Matthew J. ColeSenior Vice President, eMobility and Corporate Strategy2015Matthew J. Cole joined Littelfuse in 2015 and has held roles such as Senior Vice President of Business Development and Corporate Strategy before assuming his current position in 2021 .
    Alexander ConradSenior Vice President and General Manager, Passenger Vehicle Business2005Alexander Conrad joined Littelfuse in 2005 and has held various roles, including Sales Director EMEA and Vice President of Passenger Car Products, before his current role in 2018 .
    Peter KimSenior Vice President and General Manager, Industrial Business2003Peter Kim joined Littelfuse in 2003 and has held roles such as Director, Global Procurement and Vice President, Global Sales before his current position in 2022 .
    Chad MarakSenior Vice President and General Manager, Semiconductor Products2007Chad Marak joined Littelfuse in 2007 and has held roles such as Director of Technical Marketing and Vice President of Product Management before his current position in 2022 .
    Deepak NayarSenior Vice President and General Manager, Electronics Business2005Deepak Nayar joined Littelfuse in 2005 and has held roles such as Vice President, Global Sales, Electronics Business Unit before his current role in 2022 .
    Kristina CernigliaAudit Committee Chairperson2018Kristina A. Cerniglia has been a director since 2018 and was appointed Audit Committee Chairperson on April 25, 2024 . She has extensive finance experience, including roles at Briggs & Stratton and Hillenbrand, Inc. .
    Gregory HendersonMember of the Compensation Committee2023Gregory N. Henderson has been a director since May 2023 and serves on the Compensation Committee. He is also a Senior Vice President at Analog Devices, Inc. .

    Questions to Ask Management

    1. Given the ongoing weakening of global passenger vehicle production and slowing EV production growth, how do you plan to offset these challenges and drive growth in your transportation segment going forward?

    2. With cautious customer ordering patterns and challenging end market conditions, particularly in Europe and China, persisting, what specific strategies are you implementing to stimulate demand and improve order visibility in your electronics segment?

    3. You mentioned that conversion from design-in to production is taking longer due to customer cautiousness; how is this impacting your revenue projections, and what measures are you taking to accelerate this conversion process?

    4. Despite the margin improvements this quarter aided by favorable currency impacts and mix, how sustainable are these margins, and what steps are you taking to mitigate potential headwinds from currency fluctuations going forward?

    5. Considering the significant softness in industrial end markets, especially in Europe and China, how are you adjusting your operations and cost structures to navigate this prolonged down cycle, and when do you anticipate a recovery in these markets?