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Why Is Enersys (ENS) Up 5.8% Since Its Last Earnings Report?

Zacks Equity Research
Updated

A month has gone by since the last earnings report for Enersys ENS. Shares have added about 5.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ENS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

EnerSys Beats on Q3 Earnings & Revenues, Guides Well

EnerSys delivered third-quarter fiscal 2018 adjusted earnings of $1.25 per share, beating the Zacks Consensus Estimate of $1.14. The bottom line fared even better on a year-over-year comparison, improving 5.9% from the prior-year tally of $1.18. The figure also steered past the projected range of $1.12-$1.16.
 

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Inside The Headlines

Net sales for the quarter were up 16.9% year over year to $658.9 million. The figure also trumped the Zacks Consensus Estimate of $633.1 million. The year-over-year increase was driven by increase in organic volume, favorable pricing actions and positive impact of foreign currency translation.

On a geographic basis, all regions recorded year-over-year growth. The Americas recorded a year-over-year sales improvement of 12.5% primarily owing to strong growth in organic volume as well as favorable pricing. Net sales for the EMEA region witnessed an increase of 20.8%, while Asia’s net sales rose 27%. Europe witnessed increase in organic volume as well as favorable pricing actions and positive currency movements, while Asia benefited from strong organic volumes, favorable pricing and favorable impact of foreign currency translation.

In terms of product-line, Motive Power net sales climbed 13.5% year over year to $331.9 million, while Reserve Power went up 20.5% to $327 million. Motive Power benefited from an increase of 5%, each in organic volume and foreign currency translation impact along with 4% increase in pricing. Reserve Power growth was driven by an 11% increase in organic volume as well as a 5% positive impact of foreign currency.

The company’s operating earnings for the quarter totaled $68.4 million, up 24.1% on year-over-year basis. Gross margin contracted 200 basis points to 25.8%. Decline in gross margins can be attributed to increase in commodity costs, partially offset by an increase in organic volume as well as pricing.

Liquidity

At the end of the fiscal third quarter, EnerSys had cash and cash equivalents of $571.3 million, up from $500.3 million at the end of fiscal 2017. At the end of the reported quarter, the company’s long-term debt was $689 million, up from $587.6 million at the end of fiscal 2017.

As of Dec 31, 2017, the company’s cash from operating activities came in at $129.9 million, compared with $166.7 million recorded as of Jan 1, 2017.

Guidance

EnerSys expects fiscal fourth-quarter adjusted earnings per share in the range of $1.20-$1.24. This guidance excludes projected charges of 5 cents from restructuring programs, ERP system implementation and acquisition expenses.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

Enersys Price and Consensus

Enersys Price and Consensus | Enersys Quote

VGM Scores

At this time, ENS has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ENS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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