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EnerSys (ENS) Misses Q2 Earnings and Sales Miss Estimates, Rise Y/Y

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EnerSys ENS reported weaker-than-expected results for second-quarter fiscal 2022 (ended Oct 3, 2021). Its earnings lagged estimates by 4.72%, while sales missed the same by 1.14%.

The company’s earnings in the fiscal second quarter were $1.01 per share, lagging the Zacks Consensus Estimate of $1.06. The quarterly earnings grew 1% from the year-ago quarter’s figure of $1.00 per share on sales improvement, partially offset by increased costs and expenses.

Revenue Details

In the reported quarter, EnerSys’ net sales amounted to $791.4 million, up 11.7% year over year. The results benefitted from 11% growth in organic volumes and a 1% positive impact of pricing.

EnerSys noted that the top line benefitted from strength across Energy Systems and Motive Power segments. Backlog was more than $1 billion exiting the reported quarter.

However, EnerSys’ top line missed the Zacks Consensus Estimate of $801 million.

Geographically, the company’s net sales increased 14% year over year to $550 million in the Americas, while the metric witnessed growth of 5% to $180 million in Europe, Middle East and Africa. Sales in Asia were $61 million, reflecting an increase of 10% from the year-ago quarter.

On a sequential basis, EnerSys’ sales decreased 2.9% due mainly to a decline in organic volumes.

The company reports revenues under three segments. A brief discussion of the quarterly results is provided below:

Energy Systems’ sales were $369.8 million, contributing 46.7% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 8.5%. Volume was up 9% and pricing had an adverse impact of 1%. Foreign currency translations benefitted by 1%.

The Motive Power segment generated revenues of $320.7 million, contributing 40.5% to net revenues in the reported quarter. The figure increased 21.6% year over year based on 20% growth in volumes and a 2% positive contribution from pricing.

Specialty’s sales were $100.9 million, which contributed 12.8% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues decreased 2.8%. Volumes declined 8% in the quarter, while pricing had positive impacts of 5%.

Margin Profile

In the reported quarter, EnerSys’ cost of sales increased 15.6% year over year to $613.5 million. The cost of sales was 77.5% of the quarter’s net sales. Gross profit in the quarter grew 0.2% year over year to $177.9 million, while the gross margin fell 260 basis points (bps) year over year to 22.5%.

Operating expenses increased 5.3% year over year to $125.3 million. It represented 15.8% of net sales in the reported quarter versus 16.8% in the year-ago quarter. Adjusted operating earnings were $61.4 million, reflecting a year-over-year decline of 7.3%. Margin decreased 160 bps year over year to 7.8%.

The company’s performance in the quarter suffered from cost inflation and supply-chain constraints. However, pricing actions were a relief.

Balance Sheet & Cash Flow

Exiting the second quarter of fiscal 2022, EnerSys had cash and cash equivalents of $407.5 million, up 0.3% from $406.2 million recorded in the last reported quarter. Long-term debt increased 5.4% sequentially to $1,076 million.

In the first two quarters of fiscal 2022, the company repaid a term loan of $161.4 million and revolving credit borrowings of $5.7 million. However, proceeds for revolving credit borrowings were $275.7 million in the first half of the fiscal year.

The company used net cash of $65.6 million for its operating activities in the first half of fiscal 2022 against net cash generation of $217.3 million in the year-ago period. Capital expenditure totaled $34.6 million compared with $39.9 million in the prior-year period.

Dividend & Share Buyback

EnerSys rewarded shareholders with a dividend payout of $14.9 million in the first half of fiscal 2022. Share repurchased amounted to $31.5 million.

Concurrently, the company announced that its board of directors approved a quarterly cash dividend of 17.5 cents per share to shareholders of record as of Dec 17. The disbursement will be made on Dec 31.

Also, EnerSys’ board of directors approved a $100-million share buyback program.

Outlook

Though supply-chain constraints will be headwinds in the near term, EnerSys anticipates gaining from the healthy product demand across all businesses. Limited benefits are expected from pricing actions in the fiscal third quarter.

Enersys Price, Consensus and EPS Surprise

Enersys Price, Consensus and EPS Surprise
Enersys Price, Consensus and EPS Surprise

Enersys price-consensus-eps-surprise-chart | Enersys Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $3.6 billion, EnerSys currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the industry are discussed below.

A. O. Smith Corporation AOS presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its earnings surprise in the last reported quarter was 22.39% and that for the last four quarters was 16.82%, on average.

In the past 30 days, A. O. Smith’s earnings estimates have increased 6.6% for 2021 and 9.6% for 2022. Its shares gained 9.9% in the past three months.

Emerson Electric Co. EMR reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 1.68%. Its earnings surprise for the last four quarters is 10.69%, on average. The company presently carries a Zacks Rank #2.

Emerson’s earnings estimates increased 6.6% for fiscal 2022 (ending September 2022) and 7.7% for fiscal 2023 (ending September 2023) in the past 30 days. Its shares decreased 6.8% in the past three months.

Franklin Electric Co., Inc.’s FELE results for the last reported quarter were impressive, with earnings surpassing estimates by 6.52%. Its last four quarters average earnings surprise was 16.27%.

Franklin Electric’s earnings estimates for have increased 1% for 2021 and 7.7% for 2022 in the past month. Its shares have gained 14.5% in the past three months.


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