Littelfuse, Inc.

The company recently delivered its third consecutive positive earnings surprise driven by strong sales growth across each business segment and geographical region.

Analysts also raised their estimates following the solid quarter, a trend the company has seen for several months now.

As business improves, Littelfuse has also been returning value to shareholders through stock buy backs and the initiation of a dividend. To top it off, shares trade at a discount to their peer group.

Company Description

Littelfuse, Inc. designs and manufactures fuses and other circuit protection devices for virtually every product that uses electrical energy, including consumer electronics, automobiles and industrial equipment.

It is headquartered in Lisle, Illinois and has a market cap of $1.2 billion.

Fourth Quarter Results

Littelfuse reported its results for the fourth quarter of 2010 on February 10. Total sales came in at $142.6 million, up 11% from the same quarter in 2009. Sales growth was particularly strong in the electrical segment, which was up 14%, and the electronics segment, which grew 13%.

Demand was strong across different geographical regions as well. Europe and the Americas saw 11% top-line growth while Asia-Pacific was up 12%.

Gross profit expanded from 35.2% to 38.0% of sales. Operating income surged 46.0% as the company leveraged its fixed expenses.

Earnings per share came in at 82 cents, beating the Zacks Consensus Estimate by 2 cents. It was the company's third consecutive positive earnings surprise.

Estimates Rising

Management gave bullish guidance for 2011 following strong Q4 results. The company expects sales in the range of $670 million to $690 million, representing 10% to 13% growth. Earnings per share are expected to be in the range of $3.75 to $4.05.

Each analyst revised his estimate higher off the news. The Zacks Consensus Estimate is within guidance at $3.98. This represents 12% growth over 2010 EPS.

The 2012 consensus estimate is currently $4.28, equating to 7% EPS growth.

Earnings estimates have generally been trending higher over the last several months, as seen in the company's Price & Consensus chart:

It is a Zacks #2 Rank (Buy) stock.

Returning Value to Shareholders

With business improving, Littelfuse has been rewarding its shareholders through stock buy backs and the initiation of a dividend.

In 2010, the company spent $25.377 million buying back 643,777 shares of stock. It also began paying a regular quarterly dividend in November 2010.

It currently yields 1.1%.

Valuation

Shares have soared almost 70% since early July. Valuation remains in check, however, because of a corresponding rise in earnings estimates.

Shares trade at 13.3x forward earnings, a discount to the industry average of 15.3x. Its PEG ratio is a reasonable 1.3.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.