On Nov 26, we issued an updated research report on Enersys ENS.
Over the past three months, this Zacks Rank #3 (Hold) stock has returned 34.3% compared with the industry’s growth of 19.4%.
Enersys has been benefiting from strength in its transportation business on account of growing customer base for ODYSSEY brands, and solid demand for TPPL products in the long-haul trucking, premium automotive and agricultural spaces. It believes that opportunities related to the global 5G infrastructure build out, growth in broadband along with its ongoing efforts to expand production and new product offerings, are likely to drive revenues in the quarters ahead.
Also, the company has been steadily strengthening business through acquisitions. In this regard, its buyout of Alpha Technologies Group of Companies (completed in December 2018) has been strengthening its product portfolio across the telecom, broadband, industrial and renewable markets. Notably, this buyout had a positive impact of 22% on Enersys’ net sales in the second quarter of fiscal 2020 (ended Sep 30, 2019). Moreover, in October 2019, the company completed the acquisition of NorthStar, which is likely to boost its production capacities for TPPL products.
However, rising cost of sales has been a major concern for EnerSys over the past several quarters. The metric recorded increase of 14.6% and 13.1% in first-quarter fiscal 2020 (ended Jun 30, 2019) and second-quarter fiscal 2020, respectively, on a year-over-year basis, despite cost-reduction initiatives.
Moreover, high debt level is a headwind for the company. In the last five fiscal years (2015-2019), its long-term debt rose 14.5% (CAGR). The metric (net of unamortized debt issuance costs) grew 86.4% to $1,117.8 million on a year-over-year basis at the end of the second quarter of fiscal 2020.
Some better-ranked stocks in the Zacks Industrial Products sector are Kaman Corporation KAMN, Casella Waste Systems, Inc. CWST and Energous Corporation WATT. While Kaman sports a Zacks Rank #1 (Strong Buy), Casella Waste Systems and Energous carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kaman delivered average positive earnings surprise of 7.72% in the trailing four quarters.
Casella Waste Systems pulled off average positive earnings surprise of 1.36% in the trailing four quarters.
Energous delivered average positive earnings surprise of 6.67% in the trailing four quarters.
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