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It has been about a month since the last earnings report for EnerSys (ENS). Shares have added about 0.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is EnerSys due for a pullback? 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 catalysts.
EnerSys Earnings Miss Estimates in Q4, Decline Y/Y
EnerSys reported mixed fourth-quarter fiscal 2020 (ended Mar 31, 2020) results, wherein its earnings missed estimates but net sales surpassed the same.
The company’s adjusted earnings were $1.11 per share, lagging the Zacks Consensus Estimate of $1.22. Also, the bottom line declined 22.4% from the year-ago figure of $1.43.
For fiscal 2020, EnerSys reported adjusted earnings of $4.68, down 5.1% from the year-ago figure of $4.93.
In the quarter, EnerSys’ net sales were $781.8 million, down 1.9% from the year-ago quarter. The decline was primarily attributable to a 3% decrease in organic volumes and forex woes of 2%, partially offset by a 3% positive impact of the NorthStar acquisition. Notably, the top line beat the Zacks Consensus Estimate of $778 million.
Sales generated from the reserve power product line totaled $428.8 million, decreasing 4.6% year over year, while that from motive power increased 1.6% to $353 million. The company noted that measures to contain the coronavirus outbreak adversely impacted its performances, especially in China, and also disrupted its supply chain.
For fiscal 2020, the company generated net sales of $3,087.8 million, up 10% from the $2,808 million reported in fiscal 2019.
The company reports net sales under three segments as discussed below:
Net sales from the Americas (representing 68.7% of the quarter’s net sales) were $537.2 million, increasing 5.8% year over year. The rise was driven by 4% growth in organic volume and a positive impact of 3% from buyouts, partially offset by a 1% adverse impact of forex woes.
Net sales from Europe, Middle East and Africa (25.5%) totaled $199 million, declining 12.8% year over year. The decline was attributable to a 14% fall in organic volumes, 3% adverse impact of forex woes, partially offset by a positive impact of 4% from buyouts.
Net sales from Asia (5.8%) were $45.6 million, down 24.6% year over year. The decline was on account of a 20% decline in organic volume, 4% adverse impact of forex woes and a 1% decrease in pricing.
In the quarter, EnerSys’ cost of goods sold was $582.9 million, down 0.9% year over year. It represented 74.6% of net sales. Gross profit decreased 0.7% to $200.8 million, while margin increased 30 basis points to 25.7%.
Operating expenses were $133.8 million, representing 17.1% of net sales. Total operating earnings decreased 42.5% to $20.1 million.
Balance Sheet and Cash Flow
Exiting fiscal 2020, EnerSys had cash and cash equivalents of $327 million compared with $299.2 million at the end of the previous fiscal year. As of Mar 31, 2020, the company’s long-term debt (net of unamortized debt issuance costs) was $1,104.7 compared with $971.8 million at the end of fiscal 2019.
During fiscal 2020, it generated net cash of $253.4 million from operating activities. Capital expenditure totaled $101.4 million compared with $70.4 million incurred in the previous fiscal year.
The company anticipates witnessing uncertainties related to the coronavirus pandemic in the near term. However, it expects to see opportunities from communications and defense customers.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 51.11% due to these changes.
At this time, EnerSys has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
EnerSys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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