Enersys Q1 Earnings Surpass Estimates, Sales Miss

Enersys ENS reported first-quarter fiscal 2025 (ended Jun 30, 2024) adjusted earnings of $1.98 per share, which surpassed the Zacks Consensus Estimate of $1.97. The bottom line increased 5% year over year due to lower operating expenses.

Enersys' net sales of $852.9 million missed the consensus estimate of $878 million. The top line declined 6% year over year due to temporary spending pauses in telecom and broadband. While organic sales decreased 3%, price/mix and foreign currency translation had adverse impacts of 2% and 1%, respectively, on sales.

Segmental Discussion

The Energy Systems segment's sales (accounting for 42.3% of total sales) were $361 million, down 15% year over year. The Zacks Consensus Estimate for segmental net sales was $372 million.  Net sales decreased due to capital spending pauses of telecommunication and broadband customers. While organic sales decreased 11%, price/mix and foreign currency translation had an adverse impacts of 3% and 1%, respectively, on sales.

The Motive Power segment generated net sales of $366.2 million (accounting for 43% of total sales), up 4% year over year. The consensus estimate for segmental net sales was $366 million. The upside was driven by a 6% increase in organic volume, partially offset by a 1% unfavorable impact each from price/mix and foreign currency translation.

The Specialty segment's sales were $125.7 million (accounting for 14.7% of total sales), down 6% year over year. The consensus estimate was $136 million. Organic volume declined 3% and foreign currency translation had an adverse impact of 3% on sales.

Margin Profile

EnerSys' cost of sales decreased 8.8% year over year to $535.8 million. Gross profit decreased 0.8% year over year to $238.4 million while the adjusted gross margin was up 120 basis points (bps) to 28%.

Operating expenses decreased 2.4% year over year to $141.1 million. Adjusted operating earnings were down 1.4% to $106 million. The adjusted operating margin increased 60 bps year over year to 12.4%.

Balance Sheet and Cash Flow

At the end of the fiscal first quarter, EnerSys had cash and cash equivalents of $344.1 million compared with $346.7 million at the end of fiscal 2023. Long-term debt (net of unamortized debt issuance costs) was $867.1 million compared with $1.04 billion at the fiscal 2023-end.

EnerSys generated net cash of $10.4 million from operating activities in the fiscal first quarter compared with $74.9 million in the year-ago period. Capital expenditure totaled $36.1 million compared with $16.1 million in the previous year's period.

In fiscal 2024, EnerSys rewarded its shareholders with a dividend payout of approximately $9.1 million, up 26.1% year over year. Concurrent with the earnings release, the company's board of directors approved a 7% increase in its quarterly cash dividend, which increased to 24 cents from 22.5 cents per share.

Guidance

For fiscal 2025, EnerSys expects adjusted earnings to be in the range of $8.80–$9.20 per share compared with $8.55–$8.95 guided earlier. Net sales are now expected to be in the band of $3.735–$3.885 billion, higher than the previous projection of $3.7-$3.8 billion. The company expects capital expenditures to be approximately $100-$120 million. Tax rate is estimated to be in the band of 20–21%.

For the fiscal second quarter, the company anticipates adjusted earnings of $2.05–$2.15 per share. Net sales are projected to be in the range of $880–$920 million.

Zacks Rank and Key Picks

ENS currently carries a Zacks Rank #3 (Hold).

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