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EnerSys (ENS) Up 8.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for EnerSys (ENS). Shares have added about 8.4% 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 drivers.

EnerSys Misses Q2 Earnings & Sales Estimates, Down Y/Y

EnerSys reported weaker-than-expected second-quarter fiscal 2021 (ended Oct 4, 2020) results. Its earnings missed estimates by 3.9%, while sales lagged the same by 0.9%.

The company’s earnings in the fiscal second quarter were $1 per share, missing the Zacks Consensus Estimate of $1.04. The bottom line declined 18.7% from the year-ago quarter figure of $1.23 on weak sales performance.

Revenue Details

In the reported quarter, EnerSys’ net sales amounted to $708.4 million, down 7% year over year. Revenues were adversely impacted by 11% fall in volumes, 1% decline in price, partially offset by 4% gain from acquired assets and 1% positive impact from foreign exchange.

The company noted that the top line suffered from weakness in the Motive Power segment due to the adverse impacts of the pandemic.

Moreover, EnerSys’ top line missed the Zacks Consensus Estimate of $715 million.

Region wise, the company’s net sales decreased 8% year over year to $481 million in the Americas and fell 6% to $172 million in Europe, Middle East and Africa. Sales in Asia were $56 million, reflecting an increase of 3% from the year-ago quarter.

The company reports revenues under three segments. A brief discussion of the quarterly results is provided below:

Energy Systems’ sales were $340.8 million, which contributed 48.1% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues declined 0.6%. Volume was down 5% and pricing had an adverse impact of 1%. However, acquired assets boosted sales by 4%, whereas foreign exchange had a positive impact of 1% on sales.

Motive Power generated revenues of $263.8 million, contributing 37.2% to net revenues in the reported quarter. The figure decreased 21.3% year over year due to negative impact of 21% from lower volume, 1% from weak prices, partially offset by 1% positive impact from foreign exchange.

Specialty’s sales were $103.8 million, which contributed 14.7% to net revenues in the quarter. On a year-over-year basis, the segment’s revenues increased 23.7%. Volumes increased 9% and acquisitions had a positive impact of 17%, partially offset adverse impact of 3% from weak prices.

Margin Profile

In the reported quarter, EnerSys’ cost of sales declined 6% year over year to $530.9 million. Cost of sales was 74.9% of the quarter’s net sales. Gross profit in the quarter decreased 10% to $177.5 million, while gross margin fell 80 basis points (bps) to 25.1%.

Operating expenses decreased 10.1% year over year to $119 million. It represented 16.8% of net sales in the reported quarter compared with 17.4% in the year-ago quarter. Operating earnings were $55.4 million, reflecting a decline of 5.6%. Margin increased 10 bps year over year to 7.8%.

Interest expenses declined about 3% year over year to $9.8 million.

Balance Sheet & Cash Flow

Exiting the second quarter of fiscal 2021, EnerSys had cash and cash equivalents of $414.2 million, up 7.8% from $384.4 million recorded in the last reported quarter. Long-term debt decreased 3.8% sequentially to $1,039.2 million.

The company generated net cash of $217.3 million from operating activities in the first six months of fiscal 2021, reflecting an increase from $105.1 million generated in the year-ago period. Capital expenditure totaled $39.9 million compared with $43.4 million in the year-ago period.

Dividend

EnerSys rewarded shareholders with a dividend payout of $7.5 million in second-quarter fiscal 2021.

Outlook

Though uncertainties related to the pandemic persist, EnerSys anticipates gaining from cost control initiatives and solid product offerings in the quarters ahead.

For the third quarter of fiscal 2021, the company currently anticipates adjusted earnings to lie in the range of $1.17-$1.23 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, EnerSys has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

EnerSys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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