It has been about a month since the last earnings report for EnerSys (ENS). Shares have added about 6.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is EnerSys 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 catalysts.
Enersys Beats on Q1 Earnings, Revenues Miss Mark
Enersys reported first-quarter fiscal 2024 (ended Jul 2, 2023) adjusted earnings (excluding 29 cents from non-recurring items) of $1.89 per share, which surpassed the Zacks Consensus Estimate of $1.80. The bottom line surged 64.4% year over year due to lower cost of sales.
Enersys’ total revenues of $908.6 million missed the Zacks Consensus Estimate of $953 million. The top line inched up 1.1% year over year due to a 9% increase in price/mix. Organic sales in the quarter decreased 8%.
The Energy Systems segment’s sales (accounting for 46.7% of total sales) were $424.6 million, up 3.9% year over year. This compares with the Zacks Consensus Estimate of $467.50 million. Segmental revenues increased due to higher pricing, partly offset by lower volumes in Europe and Asia. Foreign currency translation had a negative impact of 1%, while organic revenues decreased 7%.
The Motive Power segment generated revenues of $350.8 million (accounting for 38.6% of total sales), down 4.6% year over year. The Zacks Consensus Estimate for segmental revenues was $341.31 million. The downside was due to a 14% decrease in organic sales, partly offset by an 8% increase in pricing. Acquisitions contributed 1% to segmental revenues, while foreign currency translation had an adverse impact of 1%.
The Specialty segment’s sales were $133.2 million (accounting for 14.7% of total sales), up 8.7% year over year. The Zacks Consensus Estimate for the same was $132.07 million. A 7% increase in pricing/mix and a 1% rise in organic volume contributed to the higher segmental revenues. Foreign currency translation had a favorable impact of 1%.
In the reported quarter, EnerSys' cost of sales decreased 7.6% year over year to $587.20 million. Gross profit in the quarter increased 29.5% year over year to $240.3 million, while the gross margin increased 580 basis points (bps) year over year to 26.4%.
Operating expenses increased 13.8% year over year to $144.6 million. Adjusted operating earnings surged 65.4% year over year to $107.2 million. The margin increased 460 bps year over year to 11.8%.
Balance Sheet and Cash Flow
At the end of the first quarter of fiscal 2024, EnerSys had cash and cash equivalents of $258.34 million compared with $346.67 million at the end of fiscal 2023. Long-term debt (net of unamortized debt issuance costs) was $907.77 million compared with $1,042 million at the fiscal 2023-end.
EnerSys generated net cash of $74.95 million from operating activities in the fiscal first quarter against $71.89 million used in the year-ago period. Capital expenditure totaled $16.09 million compared with $23.01 million in the previous year’s period.
In first-quarter fiscal 2024, ENS rewarded its shareholders with a dividend payout of $7.17 million, up nearly 1% year over year.
Fiscal Q2 Guidance
For the second quarter of fiscal 2024, EnerSys expects adjusted earnings of $1.77-$1.87 per share. The Zacks Consensus Estimate for the same stands at $7.67. Gross margin is expected to be 25-27%. The company expects capital expenditures of approximately $120 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
Currently, EnerSys has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise EnerSys has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
EnerSys belongs to the Zacks Manufacturing - Electronics industry. Another stock from the same industry, Emerson Electric (EMR), has gained 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Emerson Electric reported revenues of $3.95 billion in the last reported quarter, representing a year-over-year change of -21.2%. EPS of $1.29 for the same period compares with $1.38 a year ago.
For the current quarter, Emerson Electric is expected to post earnings of $1.29 per share, indicating a change of -15.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.1% over the last 30 days.
Emerson Electric has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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