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Why Is EnerSys (ENS) Down 15.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for EnerSys (ENS - Free Report) . Shares have lost about 15.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is EnerSys due for a breakout? 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 drivers.

EnerSys Q4 Earnings and Revenues Surpass Estimates

EnerSys reported better-than-expected results for fourth-quarter fiscal 2022 (ended Mar 31, 2022). EnerSys’ earnings surpassed the Zacks Consensus Estimate by 4.4% while sales beat the same by 2.9%.

ENS’ earnings in the quarter under review were $1.20 per share, surpassing the Zacks Consensus Estimate of $1.15. However, the bottom line declined 7.7% from the year-ago figure of $1.30 as higher costs and expenses more than offset the positive impacts of revenue growth.

In fiscal 2022, EnerSys’ earnings came in at $4.47, down 0.4% on a year-over-year basis.

Revenue Details

In the quarter under review, EnerSys’ revenues were $907 million, up 11.5% from the year-ago quarter’s level. Organic sales in the quarter grew 8% on the back of strengthening markets. Pricing positively impacted sales by 6% while forex woes left a negative impact of 2%.

On a sequential basis, ENS revenues increased 7.5%.

Exiting the reported quarter, EnerSys had a backlog of $1.3 billion.

ENS’ revenues surpassed the Zacks Consensus Estimate of $881 million.

Geographically, ENS' net sales increased 16% year over year to $643 million in the Americas, while the metric witnessed growth of 1% to $204 million in Europe, the Middle East and Africa. Sales in Asia were $59 million, reflecting an increase of 9% from the year-ago quarter’s level.

Its segmental performance for the fiscal fourth quarter is briefly discussed below:

Energy Systems' sales were $410 million, contributing 45.2% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues increased 18%. Volume was up 13% while pricing had a positive impact of 6%. Adverse foreign currency translations hurt 2%.

The Motive Power segment generated revenues of $365 million, contributing 40.2% to net revenues in the reported quarter. The figure increased 10% year over year based on 6% growth in volumes and a 6% positive contribution from pricing. Forex woes left a negative impact of 3%.

Specialty's sales were $132 million, contributing 14.6% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues remained flat. Pricing had a positive impact of 3% on the quarter, while volumes and foreign currency translations had negative impacts of 2% and 1%, respectively.

In fiscal 2022, EnerSys’ net sales came in at $ 3,357.3 million, up 12.7% year over year.

Margin Profile

In the reported quarter, EnerSys' cost of sales increased 15.6% year over year to $712.4 million. The cost of sales was 78.5% of the quarter's net sales. The gross profit in the quarter decreased 1.4% year over year to $194.6 million, while the gross margin fell 280 basis points (bps) year over year to 21.5%.

Operating expenses increased 12.3% year over year to $140.3 million. ENS represented 15.5% of net sales in the reported quarter compared with 15.4% in the year-ago quarter. Adjusted operating earnings were $66.8 million, reflecting a year-over-year decline of 14.8%. Margin decreased 220 bps year over year to 7.4%.

ENS' performance in the quarter suffered cost inflation and supply-chain constraints. However, pricing actions were a relief.

Balance Sheet and Cash Flow

Exiting fiscal 2022, EnerSys had cash and cash equivalents of $402.5 million, down 10.9% from $451.8 million recorded in the last reported year. Long-term debt increased 4.1% sequentially to $1,243 million.

In fiscal 2022, ENS repaid a term loan of $161.4 million and revolving credit borrowings of $88.4 million. However, proceeds for revolving credit borrowings were $523.4 million in fiscal 2022.

EnerSys used net cash of $65.6 million for its operating activities in fiscal 2022 against a net cash generation of $358.4 million in fiscal 2021. Capital expenditure totaled $74 million compared with $70 million in the previous year.

EnerSys rewarded its shareholders with a dividend payout of $29.4 million in fiscal 2022. Share repurchased amounted to $156.4 million. ENS is left to buy back shares worth $163 million.

Outlook

EnerSys anticipates gaining from healthy demand, effective pricing and technological expertise in the quarters ahead. Cost inflation is worrisome. Earnings for the first quarter of fiscal 2023 are expected to be $1.10-$1.20 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, EnerSys has an average Growth Score of C, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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