Enersys (ENS) to Report Q1 Earnings: Is a Surprise in Store?

Industrial battery manufacturer EnersysENS is slated to release first-quarter fiscal 2018 results on Aug 10. Last quarter, the company's adjusted earnings beat the Zacks Consensus Estimate of $1.21 by 5.8%.

The company has an excellent earnings surprise history, with an average positive surprise of 5.08% for the trailing four quarters. Enersys scored its fifth consecutive earnings beat in the last reported quarter, beating estimates by 5.8%.

Enersys Price and EPS Surprise

Enersys Price and EPS Surprise | Enersys Quote

Let's see how things are shaping up for this announcement.

Factors at Play

Over the past few quarters, healthy demand for batteries from energy-storage products, commercial trucks, and aerospace and defense applications has proved conducive to EnerSys' growth. The company has been taking concerted efforts to boost its total market share, which it believes can expand up to $14 billion by 2025. We believe these efforts will stoke top-line performance for the soon-to-be-reported quarter.

The company has an interesting lineup of product launches, which, it believes, will stoke growth in the quarter to be reported. As a matter of fact, rise in the sale of premium products (which exceeded 41% of net sales) has significantly boosted top-line performance. Recently, the company has launched several premium products which are expected to drive growth.

Moreover, EnerSys' strategic acquisitions have supplemented its core revenue growth over the past few quarters. Previously completed buyouts of Australia-based ICS Industries and The Enser Corporation are expected to boost fiscal first-quarter 2018 sales of stored energy and aerospace & defense business, respectively.

However, on the flip side, rising cost of raw materials are expected to inflate the cost of goods sold, thus eroding profitability for the upcoming results. In light of sharply rising lead cost, customers are placing more orders at old prices, which is hurting profits. The company expects the gross profit rate in the fiscal first quarter to decline to approximately 26%, attributable to higher lead cost.

A significant portion of the company's revenues and expenses are denominated in foreign currencies. This makes it vulnerable to fluctuations in exchange rates. A stronger U.S. currency might hurt foreign revenues and earnings in the quarter. We believe currency fluctuations to put pressure on top-line growth and margins for the quarter under review.

A stronger U.S. currency might hurt foreign revenues and earnings in the quarter.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Enersys this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.13. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Enersys has a Zacks Rank #3, which increases the predictive power of the ESP. However, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Graco Inc. GGG , with an Earnings ESP of +0.96% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Deere & Company DE , with an Earnings ESP of +5.32% and a Zacks Rank #2.

Altra Industrial Motion Corp. AIMC , with an Earnings ESP of +2.17% and a Zacks Rank #1.

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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 Nasdaq, Inc.

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

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