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EnerSys ENS is likely to gain from its presence in the diverse end markets, which allows it to nullify risks associated with a single market. In the quarters ahead, improving demand environment across defense, transportation and lithium-based battery technology end markets is likely to benefit ENS in the quarters ahead. Its organic volumes increased 8% and pricing had a favorable impact of 6% on fourth-quarter fiscal 2022. Also, ENS’ technological expertise and focus on product innovation are likely to drive its performance over time.
ENS intends to become more competent on the back of its solid product portfolio over time. EnerSys is a leading provider of NexSys Thin Plate Pure Lead product in the market. In the long term, ENS stands to benefit from favorable trends, including EV charging, home energy storage, rural broadband and 5G buildout products.
EnerSys focuses on rewarding its shareholders through dividend payments and share repurchases. ENS paid out dividends worth $29.4 million and bought back shares worth $156.4 million in fiscal 2022. ENS also launched a share buyback program in March 2022 with no expiration date. Through this program, management intends to buy back shares worth $150 million.
However, challenges related to supply chain and cost woes pose a concern. In the fourth quarter of fiscal 2022, ENS’ cost of sales and operating expenses increased 15.6% and 12.3%, respectively, while the gross margin decreased 280 basis points (bps) and the operating margin fell 220 bps. High freight costs, shortages of product components and labor constraints might be concerning for EnerSys in the quarters ahead.
EnerSys’ global presence exposes it to various environmental laws and regulations in its operating countries. Also, ENS remains vulnerable to foreign-currency and geopolitical issues. Forex woes hampered sales by 2% year over year in the fiscal fourth quarter. In the quarters ahead, ENS’ overseas business might be depressed by a stronger U.S. dollar.
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In the past three months, this currently Zacks Rank #3 (Hold) stock has dropped 10.6% compared with the industry’s decline of 7.6%.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have inched up 3.7% in the past three months.
Roper Technologies, Inc. ROP presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.2% for 2022. The stock has dipped 6% in the past three months.
IDEX Corporation IEX is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 60 days, IEX’s earnings estimates have increased 3.2% for 2022. The stock has gained 0.8% in the past three months.
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