Is EnerSys (ENS) Q1 Earnings Likely to Surprise This Season? - Analyst Blog


EnerSys ( ENS ), a leading stored energy solutions provider, is set to report first-quarter fiscal 2015 results on Aug 7. Last quarter, it posted a 7.3% positive surprise. Moreover, the company has delivered positive earnings surprises in all the trailing four quarters with an average beat of 4.6%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

EnerSys has been going strong for the past couple of years driven by a diligent operational execution and robust financial position. The company has been driving organic growth by increasing investments in innovative technologies to further strengthen its position in the manufacturing industry. The strong activity in telecom and motive power businesses, especially in key regions like the Americas and Asia is a positive.  Moreover, the ongoing recovery in the European telecom sector is leading to increased demand for 4G networks. The company being a provider of batteries for 4G is likely to gain significantly from this positive development. EnerSys expects over 10% growth in this market over the next couple of years.

This apart, it is focused on pursuing strategic acquisitions to expand its business. In fiscal 2014, the company closed three critical acquisitions, which are expected to contribute about $200 million to revenues in fiscal 2015.

However, the ongoing restructuring process coupled with increased pricing pressures might prove to be a headwind for the company. This apart, the company's thermal management business from its Purcell acquisition has been witnessing sluggish growth. Further, EnerSys is making significant investments to set up and revamp manufacturing plants in developing markets like Asia, especially in India and China. The cost of these is likely to be a drag on the company's financials in the short run. The $58.2 million charges for the Altergy arbitration is also expected to weigh on the company's results in the quarter.

Earnings Whispers?

Our proven model does not conclusively show that EnerSys is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP:  The Earning ESP stands at0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.05.

Zacks Rank:  EnerSys has a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks #4 and 5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

The Andersons, Inc. ( ANDE ) with an Earnings ESP of +6.09% and Zacks Rank #1 (Strong Buy).

Infosys Ltd. ( INFY ), with Earnings ESP of +1.24% and a Zacks Rank #2(Buy).

ACE Limited ( ACE ), with Earnings ESP of + 0.45% and a Zacks Rank #2.

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ANDERSONS INC (ANDE): Free Stock Analysis Report

ENERSYS INC (ENS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ACE , INFY , ANDE , ENS

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