A month has gone by since the last earnings report for EnerSys (ENS). Shares have lost about 8.7% 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' Q2 Earnings Top Estimates, '18 EPS View Up
EnerSys reported mixed results for second-quarter fiscal 2019 (ended September 2018).
Quarterly adjusted earnings came in at $1.17 per share, up 11.4% year over year. The reported tally was within the guided range of $1.14-$1.18 per share stated by the company in Aug 8. Notably, the bottom-line figure also surpassed the Zacks Consensus Estimate by a penny.
Net sales in the third quarter improved 7% year over year to $660.5 million. However, the top-line figure marginally missed the Zacks Consensus Estimate of $662 million. The company stated that organic volume growth and improved pricing boosted quarterly revenues, but the upside was partially offset by unfavourable foreign-exchange impact.
The revenues of Americas segment improved 13.8% year over year to $388.6 million. The Europe, the Middle East and Africa (EMEA) segment generated $204 million sales in the fiscal second quarter, up 3.1% from the year-ago tally. However, the top-line numbers of Asia dipped 12.8% year over year to $67.9 million.
Gross profit margin in the reported quarter was 24.4%, down 160 basis points (bps) year over year. Aggregate operating expenses flared up 2.6% year over year to $96.5 million. Operating margin in the quarter shrunk 80 bps year over year to 9.6%.
Balance Sheet/Cash Flow
Exiting the Sep-end quarter, EnerSys had cash and cash equivalents of $545.2 million, up from $522.1 million recorded as of Mar 31, 2018. Long-term debt stood at $599.7 million, up from $579.5 million reported at the end of fiscal 2018.
In first-half fiscal 2019, the company generated $84 million cash from operating activities, up 84.9% year over year. Capital expenditure was up 33.3% to $35.5 million.
EnerSys intends to drive its top-line growth trajectory on the back stronger end-market sales. This Zacks Rank #1 (Strong Buy) company intends to boost its near-term profitability on the back of higher revenues, improved pricing, restructuring moves and benefits secured from the enterprise resource planning system.
However, EnerSys noted that material cost inflation (on account of tariffs) and higher priced lead costs will continue to dent its margins. Adjusted earnings view for fiscal 2019 (ending March 2019) is currently pegged at $1.23-$1.27 per share, higher than the prior guidance of $1.14-$1.18 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, EnerSys has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 #2 (Buy). We expect an above average return from the stock in the next few months.