Littelfuse’s Organic and Inorganic Growth Engines Firing on All Cylinders; Raise FVE to $318

We’re raising our fair value estimate for Littelfuse to $318 per share, from $300, after raising our sales forecast to incorporate the impact of the firm’s 2021 acquisitions on growth. In particular, we expect the Carling Technologies acquisition (closed November 2021) to add a significant inorganic contribution to the firm’s transportation segment in 2022, and expect the larger combined segment to exhibit a similar organic growth profile to what we had previously forecast. We anticipate margin headwinds to impact Littelfuse throughout 2022—inclusive of rising input costs across end markets and integration costs with the Carling acquisition—but expect these to be transitory and wane by 2023. Long-term, we think growth signals for Littelfuse are flashing green. We think the secular trend toward higher voltage applications is a demand tailwind for Littelfuse, and think cross-selling within a broadening portfolio of acquisitions creates additional opportunities. We view shares as undervalued. Shares were modestly down following the release, which we view as a nearsighted reaction to margin headwinds during 2022. We think long-term investors should view the current valuation as an attractive entry point.