A month has gone by since the last earnings report for EnerSys (ENS Quick QuoteENS - Free Report) . Shares have added about 7.7% in that time frame, outperforming 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 Q2 Earnings Surpass Estimates, Revenues Miss

Enersys reported second-quarter fiscal 2024 (ended Oct 1, 2023) adjusted earnings of $1.84 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.80 per share. The bottom line surged 65.8% year over year due to lower cost of sales.

Enersys’ total revenues of $901.0 million missed the consensus estimate of $908 million. The top line inched up 0.2% year over year due to a 6% increase in price/mix and a 1% increase in foreign currency translation impact. However, organic sales in the quarter decreased 7%.

Segmental Discussion

The Energy Systems segment’s sales (accounting for 46.9% of total sales) were $422.5 million, down 3.3% year over year. This compares with the Zacks Consensus Estimate of $436 million. Segmental revenues decreased due to capital spending pauses of the telecommunication and broadband customers. Foreign currency translation had a positive impact of 1%, while organic revenues decreased 12% year over year.

The Motive Power segment generated revenues of $355.2 million (accounting for 39.4% of total sales), up 5.1% year over year. The consensus estimate for segmental revenues was $328 million. The upside was due to a 6% increase in pricing, partly offset by a 3% decrease in organic sales. Also, foreign currency translation had a favorable impact of 2%.

The Specialty segment’s sales were $123.3 million (accounting for 13.7% of total sales), down 0.1% year over year. The consensus estimate for the same was $130 million. Organic volume decreased sales by 5% year over year. Pricing/mix increased sales by 2% and foreign currency translation had a positive impact of 1%.

Margin Profile

In the reported quarter, EnerSys' cost of sales decreased 7.8% year over year to $574.1 million. Gross profit in the quarter increased 23% year over year to $239.6 million, while the gross margin increased 490 basis points (bps) year over year to 26.6%.

Operating expenses increased 4.7% year over year to $143.8 million. Adjusted operating earnings surged 38.1% year over year to $103 million. The margin increased 430 bps year over year to 11.5%.

Balance Sheet and Cash Flow

At the end of the second quarter of fiscal 2024, EnerSys had cash and cash equivalents of $327.8 million compared with $346.67 million at the end of fiscal 2023. Long-term debt (net of unamortized debt issuance costs) was $949.9 million compared with $1,042 million at the fiscal 2023 end.

EnerSys generated net cash of $185.7 million from operating activities in the first six months of fiscal 2024 against $70.3 million used in the year-ago period. Capital expenditure totaled $35.9 million compared with $39.7 million in the previous year’s period.

In the first six months of fiscal 2024, ENS rewarded its shareholders with a dividend payout of $16.3 million, up 14.7% year over year.

Fiscal Q3 Guidance

For the third quarter of fiscal 2024, EnerSys expects adjusted earnings to be $1.80-$1.90 per share. The midpoint of the guided range of $1.85 per share is above the Zacks Consensus Estimate of earnings of $1.90 per share. The gross margin is expected to be 25-27%. The company expects capital expenditures to be approximately $120 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, EnerSys has a great 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 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.

Outlook

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.

Performance of an Industry Player

EnerSys is part of the Zacks Manufacturing - Electronics industry. Over the past month, Eaton (ETN Quick QuoteETN - Free Report) , a stock from the same industry, has gained 4.4%. The company reported its results for the quarter ended September 2023 more than a month ago.

Eaton reported revenues of $5.88 billion in the last reported quarter, representing a year-over-year change of +10.7%. EPS of $2.47 for the same period compares with $2.02 a year ago.

For the current quarter, Eaton is expected to post earnings of $2.46 per share, indicating a change of +19.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.3% over the last 30 days.

Eaton has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.