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Enersys (ENS) Down 2.7% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Enersys ENS. Shares have lost about 2.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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 Miss Estimate

EnerSys kept its recent streak of earnings beats alive with its third-quarter fiscal 2017 adjusted earnings of $1.18 per share surpassing the Zacks Consensus Estimate of $1.13 by 4.4%.

The bottom line fared even better on a year-over-year comparison, improving 28.3% from the prior-year tally of $0.92. The figure also steered past the projected range of $1.12–$1.16.

EnerSys’ diligent restructuring initiatives have produced tangible improvements in short-term productivity, which drove bottom-line growth. In addition, a fall in the cost of goods proved conducive to the earnings growth.

Inside the Headlines

Net sales edged down 1.7% year over year to $563.7 million during the quarter. Also, the top line fell short of the Zacks Consensus Estimate of $588 million. The year-over-year decline was stemmed by the adverse foreign currency fluctuations as well as a dip in organic revenues.

In terms of product lines, Reserve Power was flat on a year-over-year basis. While contributions from acquisitions boosted sales, this was completely offset by foreign currency headwinds. Motive Power product revenues were down 3.1% year over year. Fall in organic sales and foreign currency fluctuations played a major spoilsport for this segment.

In terms of geography, both the Asian and EMEA regions recorded a year-over-year decline. While the Asian region net sales dipped 9.7%, EMEA net sales were down by 5.4%, both on a year-over-year basis. However, the Americas region witnessed a modest year-over-year sales improvement of 2.5%, offsetting some of this decline. While currency translation woes and organic sales decline marred sales in both the EMEA and Asia; positive contributions from acquisition drove sales for Americas.

EnerSys’ operating earnings for the quarter remained flat (inching up 0.7%) year over year to $55.1 million. Nevertheless, gross margin expanded 230 basis points to 27.7. Improvements in gross margins came on the back of improved manufacturing costs and favorable pricing of lead.

Liquidity

At the end of the fiscal third quarter, EnerSys had cash and cash equivalents of $467.1 million, up from $440.3 million at the end of second-quarter fiscal 2017. At the end of the quarter, the company’s long-term debt was $600.6 million, edging up from $599.4 million at the end of second-quarter fiscal 2017.

During the quarter, net cash from operating activities came in at $166.7 million, compared with $232.7 million recorded in the prior-year quarter.
 

Guidance

Concurrent with the earnings release, EnerSys offered its guidance for fourth-quarter fiscal 2017. The company expects non-GAAP earnings in the range of $1.19–$1.23 per share, excluding projected charges of $0.03 from restructuring programs and $0.01 from acquisition expenses.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Enersys Price and Consensus

 

Enersys Price and Consensus | Enersys Quote

VGM Scores

At this time, Enersys's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% 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.

Based on our scores, the stock is suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.


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