It has been about a month since the last earnings report for EnerSys (
ENS Quick Quote ENS - Free Report) . Shares have lost about 4.4% 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 catalysts.
EnerSys Q3 Earnings Surpass Estimates, Revenues Up Y/Y
EnerSys reported mixed results for third-quarter fiscal 2023 (ended Jan 1, 2023). ENS’ earnings beat the Zacks Consensus Estimate of $1.24 by 2.4%. However, sales missed the same by 1.7%.
The bottom line increased 25.7% from the year-ago figure of $1.01 driven by higher sales generation across all segments. Revenue Details
In the quarter under review, EnerSys’ revenues were $920.2 million, up 9% from the year-ago quarter. Organic sales in the quarter grew 5% on the back of strengthening markets. Pricing positively impacted sales by 8%, while forex woes left a negative impact of 4%.
ENS’ revenues missed the Zacks Consensus Estimate of $936 million. Geographically, ENS' net sales increased 15% year over year to $665 million in the Americas, while the metric witnessed a decline of 2% to $199 million in Europe, the Middle East and Africa. Sales in Asia were $56 million, declined 11% year-over-year. Segmental performance for the fiscal third quarter is briefly discussed below: Energy Systems' sales were $434 million, contributing 47.2% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues increased 13%. Volume was up 8%, while pricing had a positive impact of 9%. Adverse foreign currency translations hurt 4%. The Motive Power segment generated revenues of $362 million, contributing 39.3% to net revenues in the reported quarter. The figure increased 7% year over year based on 3% growth in volumes and an 8% contribution from pricing. Forex woes left a negative impact of 5%. Specialty sales were $124 million, contributing 13.5% to net revenues in the quarter under review. On a year-over-year basis, the segment's revenues increased 4%. Volume and pricing had a positive impact of 1% and 5%, respectively, on the quarter, while foreign currency translations had a negative impact of 2%. Margin Profile
In the reported quarter, EnerSys' cost of sales increased 7.2% year over year to $707.4 million. The cost of sales was 78.9% of the quarter's net sales. The adjusted gross profit in the quarter increased 15.5% year over year to $212.8 million, while the gross margin increased 130 basis points (bps) year over year to 23.1%.
Operating expenses increased 2.8% year over year to $134.3 million. The metric represented 15.6% of net sales in the reported quarter compared with 15.5% in the year-ago quarter. Adjusted operating earnings were $84.9 million, increasing 41% year-over-year. The margin increased 200 bps year over year to 9.2%. Balance Sheet and Cash Flow
While exiting the third quarter of fiscal 2023, EnerSys had cash and cash equivalents of $298.1 million, down 25.9% from $402.5 million recorded in the fourth quarter of fiscal 2022. Long-term debt decreased 11.1% to $1,105.1 million from $1,243 million recorded in the fourth quarter of fiscal 2022.
In the first nine months of fiscal 2023, ENS repaid short-term debt of $20.3 million and revolving credit borrowings of $422.1 million. However, proceeds for revolving credit borrowings were $291.1 million in the first nine months of fiscal 2023. EnerSys generated net cash of $135.8 million for its operating activities in the first nine months of fiscal 2023 against $78 million used in the year-ago period. Capital expenditure totaled $57.5 million compared with $52.4 million in the previous year’s period. ENS rewarded its shareholders with a dividend payout of $21.4 million in the first nine months of fiscal 2023. Treasury stock repurchase amounted to $22.9 million. ENS is left to buy back shares worth $40.8 million. Outlook
EnerSys anticipates gaining from robust customer demand in diverse end markets. In the quarters ahead, the company expects to benefit from a slowdown as large portions of its business are cycle-independent as well as from its significant cash flow generation during past recessionary periods. However, microeconomic conditions, forex woes and European utility inflation are worrisome. Earnings for the fourth quarter of fiscal 2023 are expected to be $1.33-$1.43 per share. The gross margin is expected to be in the range of 22-24%. Capital expenditure is anticipated to be approximately $90 million for fiscal 2023 compared with $100 million predicted earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 6.18% due to these changes.
At this time, EnerSys has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, EnerSys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
EnerSys belongs to the Zacks Manufacturing - Electronics industry. Another stock from the same industry, A.O. Smith (
AOS Quick Quote AOS - Free Report) , has gained 2.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
A.O. Smith reported revenues of $936.1 million in the last reported quarter, representing a year-over-year change of -6%. EPS of $0.86 for the same period compares with $0.87 a year ago.
For the current quarter, A.O. Smith is expected to post earnings of $0.76 per share, indicating a change of -1.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for A.O. Smith. Also, the stock has a VGM Score of B.