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EnerSys (ENS) Clinches U.S. Army Deal to Supply Batteries

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EnerSys (ENS - Free Report) recently announced that it has secured a contract from the U.S. Defense Logistics Agency (“DLA”) to supply them with proprietary Thin Plate Pure Lead (“TPPL”) Hawker ARMASAFE Plus batteries. The contract, which has a tenure of three years with an option for two additional years, is valued at over $71 million. 

The premium reserve power and motive power battery manufacturer has been supplying Hawker ARMASAFE Plus batteries to the U.S. military over the past fifteen years. The company works with the U.S. military and numerous other federal agencies to make batteries for a gamut of applications. Batteries of DLA are used by all branches of the U.S. military in combat and tactical vehicles as well as generators. EnerSys is confident about this share helping in further cementing its relationship with the military.

EnerSys plans to produce the Hawker ARMASAFE Plus batteries at its Warrensburg facility, which also manufactures batteries for the U.S. Navy nuclear submarines and aircrafts.

Meanwhile, the U.S. Army continues to transition from traditional flooded batteries to Valve Regulated Lead Acid ones. EnerSys believes its diverse portfolio offers it a competitive edge over peers to cater to the changing demands of the U.S. army. As a matter of fact, strong sales of TPPL batteries in key end markets, including Europe, the Middle East and Africa, have acted as a key top-line growth drivers in the past few quarters. Robust market traction of “Odyssey TPPL” batteries to the trucking industry in the U.S. also boosted the company’s sales in recent times.

The company’s shares returned 34.3% over the past one year, way better than the Zacks categorized Machinery-Electrical industry's average return of 19.0%. The company has a positive average surprise of 4.4%, for the trailing four quarters, beating estimates throughout. Encouragingly, it has been witnessing positive activity on the earnings estimate revision front.

Analysts have become increasingly bullish about the company over the past two months, as the Zacks Consensus Estimate for fiscal 2017 earnings has trended up sharply from $4.60 to $4.68 over the same time frame. We believe the company’s dominant position in the lead-acid battery market, impressive sales in key product lines, diligent restructuring actions and associated cost savings bode well for this Zacks Rank #2 (Buy) company’s growth.

Other Stocks to Consider

Other stocks worth considering in the broader sector include II-VI Incorporated , Dycom Industries, Inc (DY - Free Report) and DR Horton Inc. (DHI - Free Report) . While II-VI Incorporated and Dycom Industries sport a Zacks Rank #1 (Strong Buy), DR Horton Inc. carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

II-VI Incorporated has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four remarkable consecutive beats.

Dycom has a positive average earnings surprise of 17.30% for the last four quarters, having beaten estimates all through.

DR Horton has a decent earnings beat history, having surpassed estimates twice over the trailing four quarters for an average beat of 6.3%.

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