EnerSys (ENS) Beats On Q4 Earnings & Revenues, View Upbeat

EnerSys (NYSE:ENS) delivered fourth-quarter fiscal 2018 adjusted earnings of $1.24 per share, beating the Zacks Consensus Estimate of $1.23. The figure came in at the higher end of the projected range of $1.20-$1.24. The bottom line did not fare as well in a year-over-year comparison, declining 3.1% from the prior-year quarter’s tally of $1.28.

In fiscal 2018, EnerSys reported adjusted earnings of $4.65 compared with the year-ago tally of $4.75.

Inside the Headlines

Net sales for the quarter were up 9% year over year to $683 million. The figure also trumped the Zacks Consensus Estimate of $671 million. The upside was driven by positive impact of foreign currency translation, favorable pricing actions, and increase in organic volume.

For fiscal 2018, the company reported net sales of $2,581.8 million, up 9% from the $2,367.1 million reported in fiscal 2017.

Coming back to the fiscal quarter, on a geographic basis, all of the regions recorded year-over-year growth. Net sales for the EMEA region improved 14.2%, while Asia’s net sales rose 17.6%. EMEA witnessed decline in organic volume, which was more than offset by favorable pricing actions and strong positive currency movements.

Asia benefited from strong organic volumes, favorable pricing and favorable impact of foreign currency translation. The Americas recorded year-over-year sales improvement of 4.6%, primarily owing to decent growth in organic volume and favorable pricing.

In terms of product line, Motive Power net sales climbed 9.4% year over year to $360 million and Reserve Power went up 8.8% to $323 million. Motive Power benefited from an increase of 1% in organic volume and 6% in foreign currency translation impact along with 2% increase in pricing. Reserve Power growth was driven by 1% increase in organic volume, a 4% positive impact of foreign currency and 4% positive impact of pricing actions.

The company’s operating earnings for the quarter totaled $67.3 million, up 29.7% on a year-over-year basis.

Enersys Price, Consensus and EPS Surprise

Liquidity

At the end of the fiscal fourth quarter, EnerSys had cash and cash equivalents of $522.1 million, up from $500.3 million at the end of fiscal 2017. At the end of the reported quarter, the company’s net debt was $187.8 million, down from $216.6 million at the end of fiscal 2017.

For fiscal 2018, the company’s net cash from operating activities came in at $211 million, compared with $246 million recorded in the previous fiscal year.

Guidance

EnerSys expects first-quarter fiscal 2019 adjusted earnings per share in the range of $1.15-$1.19. This guidance excludes projected charges of 6 cents from restructuring programs, ERP system implementation and acquisition expenses.

Our Take

EnerSys believes long-term growth drivers are intact, which is likely to drive top-line performance in fiscal 2018. These factors include higher demand for premium products, lean initiatives, robust prospects in Asia, cost reduction programs and strategic product launches.

Currently, the company’s segments — Motive Power and Reserve Power — are witnessing good prospects. For Motive Power business, the company believes that China will provide the much-needed growth impetus, as the Chinese market thrives on the back of increasing middle-class population. The company believes Indian markets act as a strong catalyst for the Reserve Power Business.

However, the company is in the midst of a transformation, wherein it has been resorting to multiple long-term investments to boost growth. This might impact the company’s gross margins adversely in the coming quarters.

EnerSys currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

A few other top-ranked stocks in the same space are Capstone Turbine Corp. (NASDAQ:CPST) , Energous Corp. (NASDAQ:WATT) and Regal Beloit Corp. (NYSE:RBC) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Capstone Turbine has a decent earnings surprise history, surpassing estimates twice in the trailing four quarters, with an average beat of 20.8%.

Energous also boasts a decent earnings surprise history, exceeding estimates twice in the trailing four quarters, with an average beat of 1.4%.

Regal Beloit has posted earnings beats in three of the trailing four quarters, for an average surprise of 1.6%.

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