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EnerSys (ENS) Q1 Earnings Match Estimates, Revenues Miss

EnerSys ENS reported mixed results for first-quarter fiscal 2023 (ended Jun 30, 2022). ENS’ earnings matched the Zacks Consensus Estimate of $1.15, while sales missed the same by 0.3%.

The bottom line declined 8% from the year-ago figure of $1.25 as higher costs and expenses more than offset the positive impacts of revenue growth.

Revenue Details

In the quarter under review, EnerSys’ revenues were $899 million, up 10.3% from the year-ago quarter’s level. Organic sales in the quarter grew 7% on the back of strengthening markets. Pricing positively impacted sales by 8%, while forex woes left a negative impact of 5%.

On a sequential basis, ENS revenues decreased 0.9%.

At the time of exiting the reported quarter, EnerSys had a backlog of $1.5 billion.

ENS’ revenues missed the Zacks Consensus Estimate of $900 million.

Geographically, ENS' net sales increased 16% year over year to $645 million in the Americas, while the metric witnessed a decline of 3% to $195 million in Europe, the Middle East and Africa. Sales in Asia were $59 million, reflecting an increase of 3% from the year-ago quarter’s level.

Segmental performance for the fiscal first quarter is briefly discussed below:

Energy Systems' sales were $401 million, contributing 45.5% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues increased 11%. Volume was up 7%, while pricing had a positive impact of 7%. Adverse foreign currency translations hurt 4%.

The Motive Power segment generated revenues of $368 million, contributing 40.9% to net revenues in the reported quarter. The figure increased 8% year over year based on 7% growth in volumes and an 8% contribution from pricing. Forex woes left a negative impact of 6%.

Specialty's sales were $123 million, contributing 13.6% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues increased 7.3. Volume and Pricing had a positive impact of 10% and 6%, respectively, on the quarter, while foreign currency translations had a negative impact of 2%.

Enersys Price and Consensus

Enersys price-consensus-chart | Enersys Quote

Margin Profile

In the reported quarter, EnerSys' cost of sales increased 13.9% year over year to $713.5 million. The cost of sales was 79.4% of the quarter's net sales. The gross profit in the quarter decreased 4% year over year to $194.6 million, while the gross margin fell 300 basis points (bps) year over year to 21%.

Operating expenses increased 2.1% year over year to $127.1 million. The metric represented 14.1% of net sales in the reported quarter compared with 15.3% in the year-ago quarter. Adjusted operating earnings were $64.8 million, reflecting a year-over-year decline of 10.3%. Margin decreased 200 bps year over year to 7.2%.

ENS' performance in the quarter suffered cost inflation and supply-chain constraints. However, pricing actions were a relief.

Balance Sheet and Cash Flow

While exiting the first quarter of fiscal 2023, EnerSys had cash and cash equivalents of $383.2 million, down 4.8% from $451.8 million recorded a year ago. Long-term debt increased 10.8% sequentially to $1,376.7 million.

In the first three months of fiscal 2023, ENS repaid short-term debt of $8 million and revolving credit borrowings of $27.2 million. However, proceeds for revolving credit borrowings were $163.2 million in the first three months of fiscal 2023.

EnerSys used net cash of $71.9 million for its operating activities in the first three months of fiscal 2023 compared with $48.1 million used in the year-ago period. Capital expenditure totaled $23 million compared with $16.4 million in the previous year’s period.

ENS rewarded its shareholders with a dividend payout of $7.1 million in the first three months of fiscal 2023. Share repurchased amounted to $22.9 million. ENS is left to buy back shares worth $190 million.

Concurrently, EnerSys’ board of directors approved a quarterly cash dividend of 17.5 cents per share to its shareholders of record as of Sep 16, 2022. The disbursement will be made on Sep 30, 2022.

Outlook

EnerSys anticipates gaining from healthy demand, effective pricing and technological expertise in the quarters ahead. Cost inflation is worrisome. Earnings for the second quarter of fiscal 2023 are expected to be $1.05-$1.15 per share. Capital expenditure is anticipated to be $100 million (including $23 million spent in the first quarter of fiscal 2023).

Zacks Rank & Stocks to Consider

EnerSys currently has a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:

Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 24.3% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 47%, on average.

In the past 60 days, TWI’s earnings estimates have increased 39.5% for 2022. The stock has surged 42.7% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 30.7% in the past six months.


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