It has been about a month since the last earnings report for EnerSys (ENS). Shares have added about 1.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
EnerSys Q1 Earnings & Revenues Miss Estimates, Up Y/Y
EnerSys reported weaker-than-expected results for the first quarter of fiscal 2020 (ended Jun 30, 2019), wherein both earnings and revenues missed estimates.
The company’s adjusted earnings were $1.30 per share, missing the Zacks Consensus Estimate of $1.32. However, the bottom line increased 11.1% from the year-ago figure of $1.17.
In the reported quarter, EnerSys’ net sales were $780.2 million, reflecting growth of 16.3% from the year-ago quarter. The improvement was driven by 22% positive impact of the Alpha acquisition, partially offset by 3% decrease in organic volumes, 1% decline in pricing and forex woes of 2%. However, the top line lagged the Zacks Consensus Estimate of $827.4 million.
Sales generated from the reserve power product line totaled $436 million, increasing 34.6% year over year while that from motive power declined 0.9% to $344 million.
The company reports net sales under three segments as discussed below:
Revenues from the Americas (representing roughly 66.3% of the quarter’s net sales) were $517.1 million, increasing 31.7% year over year. The rise was driven by 39% increase from acquired assets, partially offset by 1% adverse impact of forex woes and 6% decline in organic volume.
Revenues from Europe, Middle East and Africa (26%) totaled $203.2 million, declining 3.5% year over year. Adverse impact of 5% from unfavorable movements in foreign currencies and 2% adverse impact from unfavorable pricing was offset by 3% growth in organic volumes.
Revenues from Asia (7.7%) were $59.9 million, down 11.8%. Decline in organic volume affected results by 8% and forex woes had an adverse 4% impact.
In the quarter, EnerSys’ cost of goods sold was $578.7 million. It represented 74.2% of net sales. Gross profit increased 21.9% year over year to $201.5 million, with margin increasing 120 basis points (bps) to 25.8%.
Operating expenses jumped 31.7% year over year to $130.8 million. It represented 16.8% of net sales. Operating income in the quarter increased 6.4% to $68.3 million. Operating margin slipped 70 bps to 8.8%.
Balance Sheet and Cash Flow
Exiting the first quarter of fiscal 2020, EnerSys had cash and cash equivalents of $262.1 million compared with $512.5 million at the end of the year-ago quarter.
During the quarter, the company generated net cash of $30.4 million from operating activities, reflecting an increase of 18.8%. Capital expenditure totaled $17.3 million compared with $15.5 million incurred in the year-earlier quarter.
For the second quarter of fiscal 2020 (ending September 2019), EnerSys anticipates adjusted earnings of $1.20-$1.24 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -14.18% due to these changes.
Currently, EnerSys has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise EnerSys has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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