Enersys (ENS) Q2 Earnings Surpass Estimates, Revenues Miss
Enersys ENS reported second-quarter fiscal 2024 (ended Oct 1, 2023) adjusted earnings of $1.84 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.80 per share. The bottom line surged 65.8% year over year due to lower cost of sales.
Enersys’ total revenues of $901.0 million missed the consensus estimate of $908 million. The top line inched up 0.2% year over year due to a 6% increase in price/mix and a 1% increase in foreign currency translation impact. However, organic sales in the quarter decreased 7%.
Segmental Discussion
The Energy Systems segment’s sales (accounting for 46.9% of total sales) were $422.5 million, down 3.3% year over year. This compares with the Zacks Consensus Estimate of $436 million. Segmental revenues decreased due to capital spending pauses of the telecommunication and broadband customers. Foreign currency translation had a positive impact of 1%, while organic revenues decreased 12% year over year.
The Motive Power segment generated revenues of $355.2 million (accounting for 39.4% of total sales), up 5.1% year over year. The consensus estimate for segmental revenues was $328 million. The upside was due to a 6% increase in pricing, partly offset by a 3% decrease in organic sales. Also, foreign currency translation had a favorable impact of 2%.
The Specialty segment’s sales were $123.3 million (accounting for 13.7% of total sales), down 0.1% year over year. The consensus estimate for the same was $130 million. Organic volume decreased sales by 5% year over year. Pricing/mix increased sales by 2% and foreign currency translation had a positive impact of 1%.
Enersys Price, Consensus and EPS Surprise
Enersys price-consensus-eps-surprise-chart | Enersys Quote
Margin Profile
In the reported quarter, EnerSys' cost of sales decreased 7.8% year over year to $574.1 million. Gross profit in the quarter increased 23% year over year to $239.6 million, while the gross margin increased 490 basis points (bps) year over year to 26.6%.
Operating expenses increased 4.7% year over year to $143.8 million. Adjusted operating earnings surged 38.1% year over year to $103 million. The margin increased 430 bps year over year to 11.5%.
Balance Sheet and Cash Flow
At the end of the second quarter of fiscal 2024, EnerSys had cash and cash equivalents of $327.8 million compared with $346.67 million at the end of fiscal 2023. Long-term debt (net of unamortized debt issuance costs) was $949.9 million compared with $1,042 million at the fiscal 2023 end.
EnerSys generated net cash of $185.7 million from operating activities in the first six months of fiscal 2024 against $70.3 million used in the year-ago period. Capital expenditure totaled $35.9 million compared with $39.7 million in the previous year’s period.
In the first six months of fiscal 2024, ENS rewarded its shareholders with a dividend payout of $16.3 million, up 14.7% year over year.
Fiscal Q3 Guidance
For the third quarter of fiscal 2024, EnerSys expects adjusted earnings to be $1.80-$1.90 per share. The midpoint of the guided range of $1.85 per share is lower than the Zacks Consensus Estimate of earnings of $1.90 per share. The gross margin is expected to be in the range of 25-27%. The company expects capital expenditures to be approximately $120 million.
Zacks Rank & Stocks to Consider
ENS currently carries a Zacks Rank #4 (Sell). Some better-ranked companies from the Industrial Products sector are discussed below:
Graco Inc. GGG presently carries a Zacks Rank #2 (Buy). GGG’s earnings surprise in the last four quarters was 7.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.3%. The stock has gained 13.5% in the past year.
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.
AIT’s earnings estimates have increased 1.9% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 26.8% in the past year.
A. O. Smith Corporation AOS currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased 4.5% for 2023. The stock has soared 29.2% in the past year.
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