It has been about a month since the last earnings report for EnerSys (ENS). Shares have lost about 13.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
EnerSys Lags Q3 Earnings Estimates, Declares Dividend
EnerSys reported weaker-than-expected third-quarter fiscal 2020 (ended Dec 29, 2019) results, wherein both earnings and revenues missed estimates.
The company’s adjusted earnings were $1.04 per share, lagging the Zacks Consensus Estimate of $1.13. Also, the bottom line declined 11.1% from the year-ago figure of $1.17.
In the quarter, EnerSys’ net sales were $763.7 million, up 12.3% from the year-ago quarter. The improvement was driven by 20% positive impact of Alpha and NorthStar acquisitions, partially offset by 5% decrease in organic volumes, 2% decline in pricing and forex woes of 1%. However, the top line missed the Zacks Consensus Estimate of $784 million.
Sales generated from the reserve power product line totaled $448.2 million, increasing 36% year over year while that from motive power declined about 10% to $315.5 million.
The company reports net sales under three segments as discussed below:
Revenues from the Americas (representing roughly 65.9% of the quarter’s net sales) were $503.1 million, increasing 25.1% year over year. The rise was driven by positive impact of 32% from the Alpha and NorthStar buyouts, partially offset by 4% decline in organic volume, 2% decrease in pricing and 1% adverse impact of forex woes.
Revenues from Europe, Middle East and Africa (26.5%) totaled $202.3 million, declining 7.1% year over year. The decline was attributable to 9% fall in organic volumes, 2% adverse impact of forex woes, partially offset by a positive impact of 4% from the NorthStar buyout.
Revenues from Asia (7.6%) were $58.3 million, down 3.2%.The decline was on account of 2% decrease in pricing and 1% adverse impact of forex woes.
In the quarter, EnerSys’ cost of goods sold was $574.6 million, up 12.3% year over year. It represented 75.2% of net sales. Gross profit increased 12.6% to $185.2 million, with margin increasing 10 basis points to 24.3%.
Operating expenses were $132.7 million, representing 17.4% of net sales. Total operating earnings decreased 13.8% to $43.1 million.
Balance Sheet and Cash Flow
Exiting the third quarter of fiscal 2020, EnerSys had cash and cash equivalents of $272.5 million compared with $397.2 million at the end of the year-ago quarter.
During the first nine months of fiscal 2020, the company generated net cash of $175.8 million from operating activities. Capital expenditure totaled $60.9 million compared with $52.7 million incurred in the year-ago period.
Concurrent with the earnings release, the company’s board of directors approved a quarterly cash dividend of 17.5 cents per share to shareholders on record as of Mar 13, 2020. The payment will be made on Mar 27.
For the fourth quarter of fiscal 2020 (ending March 2020), EnerSys anticipates adjusted earnings of $1.43-$1.47 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
Currently, EnerSys has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
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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