On Thursday, BTIG adjusted its stance on EnerSys (NYSE:ENS), shifting the stock's rating from Buy to Neutral. The move follows EnerSys's fourth-quarter earnings release, where the company reported an adjusted earnings per share (EPS) of $2.08, aligning with the upper end of their projected range.
The company's stock experienced an approximate 10% increase midday. EnerSys also provided its first fiscal year 2025 guidance, forecasting revenues between $3.675 billion and $3.825 billion, and an adjusted EPS in the range of $8.55 to $8.95.
EnerSys announced the pending acquisition of Bren-Tronics, a private manufacturer of portable power solutions, which is anticipated to be finalized by the end of the first quarter of fiscal year 2025. Bren-Tronics reported sales of around $100 million in calendar year 2023. The revenue guidance for the first quarter of fiscal year 2025 is set at $860 million to $900 million, with an adjusted EPS forecast of $1.93 to $2.03.
The company has seen a year-over-year increase of approximately 310 basis points in adjusted gross margins, now at around 28%. This improvement is partly attributed to the benefits from the Inflation Reduction Act (IRA) tax credit, which is expected to provide EnerSys with $120 million to $160 million per year as a cost of goods sold (COGS) flow-through. Additionally, EnerSys's data center business has grown by about 10% sequentially, making up roughly 10% of the company's total revenue, up from 8% in the fourth quarter of the previous fiscal year.
Despite acknowledging EnerSys's favorable long-term positioning due to several secular tailwinds, such as electrification, automation, data center expansion, and 5G, BTIG cites valuation concerns as the reason for its neutral stance.
InvestingPro Insights
Following BTIG's adjustment of EnerSys's stock rating, current InvestingPro data suggests a nuanced picture for investors considering the company's financial health and market performance. With a market capitalization of $4.33 billion and a P/E ratio standing at 16.29, EnerSys appears to be valued by the market at a moderate earnings multiple. Notably, the adjusted P/E ratio for the last twelve months as of Q3 2024 is projected at a lower 12.48, indicating potential for growth relative to near-term earnings, which aligns with one of the InvestingPro Tips highlighting the company's low P/E ratio relative to near-term earnings growth.
InvestingPro data also shows a dividend yield of 0.92%, reflecting the company's commitment to returning value to shareholders, a fact that is underscored by its history of maintaining dividend payments for 12 consecutive years. This commitment to shareholder returns is further evidenced by the InvestingPro Tip pointing out EnerSys's high shareholder yield. Moreover, the company's ability to manage its financial obligations is indicated by the fact that its liquid assets exceed short-term obligations, providing a level of financial stability for potential investors.
For investors seeking additional insights, there are more InvestingPro Tips available, such as the expected net income growth this year and the stock's generally low price volatility. To explore these further, visit https://www.investing.com/pro/ENS and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a wealth of financial analysis and market data.
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