EnerSys ENS reported mixed results for first-quarter fiscal 2022 (ended Jul 4, 2021). Its earnings surpassed estimates by 4.17%, while sales lagged the same by 0.03%.

The company’s earnings in the fiscal first quarter were $1.25 per share, surpassing the Zacks Consensus Estimate of $1.20. The quarterly earnings grew 35.9% from the year-ago quarter’s figure of 92 cents per share on sales improvement, partially offset by an increase in costs and expenses.

Revenue Details

In the reported quarter, EnerSys’ net sales amounted to $814.9 million, up 15.6% year over year. The results benefitted from 12% growth in volumes and a 4% positive impact from foreign currency movements.

The company noted that the top line benefitted from strength across all the segments. Backlog, exiting the reported quarter, was at $850 million.

However, EnerSys’ top line lagged the Zacks Consensus Estimate of $815 million.

Geographically, the company’s net sales increased 13% year over year to $557 million in the Americas, while the metric witnessed growth of 27% to $201 million in Europe, Middle East and Africa. Sales in Asia were $57 million, reflecting an increase of 3% from the year-ago quarter.

The company reports revenues under three segments. A brief discussion of the quarterly results is provided below:

Energy Systems’ sales were $371.2 million, which contributed 45.6% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 5%. Volume was up 3% and pricing had an adverse impact of 1%. Foreign currency translations benefitted by 3%.

The Motive Power segment generated revenues of $336.1 million, contributing 41.2% to net revenues in the reported quarter. The figure increased 27.9% year over year on the back of 22% growth in volumes, 1% positive contribution from pricing and 5% of forex tailwinds.

Specialty’s sales were $107.6 million, which contributed 13.2% to net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 21.3%. Volumes grew 18% in the quarter, while pricing and foreign currency translations had positive impacts of 1% and 2%, respectively.

Margin Profile

In the reported quarter, EnerSys’ cost of sales increased 17.3% year over year to $621.7 million. Cost of sales was 76.3% of the quarter’s net sales. Gross profit in the quarter grew 10.4% year over year to $193.2 million, while gross margin fell 110 basis points (bps) year over year to 23.7%.

Operating expenses increased 3.4% year over year to $124.5 million. It represented 15.3% of net sales in the reported quarter versus 17.1% in the year-ago quarter. Adjusted operating earnings were $75.1 million, reflecting year-over-year growth of 22.7%. Margin increased 50 bps year over year to 9.2%.

The company’s performance in the quarter suffered from shortages in transportation, raw material and labor. Measures to deal with these issues were taken.

Balance Sheet & Cash Flow

Exiting the first quarter of fiscal 2022, EnerSys had cash and cash equivalents of $406.2 million, down 10.1% from $451.8 million recorded in the last reported quarter. Long-term debt increased 5.2% sequentially to $1,020.4 million.

In the reported quarter, the company repaid a term loan of $11.4 million and revolving credit borrowings of $5.7 million. However, proceeds for revolving credit borrowings were $65.7 million in the quarter.

The company used net cash of $48.1 million for its operating activities in the quarter against net cash generation of $116.6 million in the year-ago quarter. Capital expenditure totaled $16.4 million compared with $26.3 million in the prior-year quarter.

Dividend & Share Buyback

EnerSys rewarded shareholders with a dividend payout of $7.4 million in first-quarter fiscal 2022. Shares repurchased amounted to $31.5 million.

Concurrently, the company announced that its board of directors approved the payment of a quarterly cash dividend of 17.5 cents per share to shareholders of record as of Sep 10. The disbursement will be made on Sep 24.

Outlook

Though supply-chain constraints will be headwinds in the near term, EnerSys anticipates gaining from the healthy demand for products across all businesses.

Enersys Price, Consensus and EPS Surprise

Enersys price-consensus-eps-surprise-chart | Enersys Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $4.2 billion, the company currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the industry are A. O. Smith Corporation AOS, Emerson Electric Co. EMR and Regal Beloit Corporation RBC. All companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, earnings estimates for all these companies improved for the current year. Further, earnings surprise for the last reported quarter was 12.31% for A. O. Smith, 11.22% for Emerson and 11.76% for Regal Beloit.

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