EnerSys (ENS) Bundle
Understanding EnerSys (ENS) Revenue Streams
Understanding EnerSys’s Revenue Streams
This section provides a detailed analysis of the revenue streams for EnerSys, focusing on the breakdown of primary revenue sources, year-over-year growth rates, contributions from different business segments, and any significant changes observed.
Breakdown of Primary Revenue Sources
For the quarter ended September 29, 2024, EnerSys reported net sales as follows:
| Segment | Net Sales (Millions) | Percentage of Total Net Sales |
|---|---|---|
| Energy Systems | $382.1 | 43.2% |
| Motive Power | $366.7 | 41.5% |
| Specialty | $134.9 | 15.3% |
| Total Net Sales | $883.7 | 100.0% |
For the six months ended September 29, 2024, the revenue breakdown was:
| Segment | Net Sales (Millions) | Percentage of Total Net Sales |
|---|---|---|
| Energy Systems | $743.1 | 42.8% |
| Motive Power | $732.9 | 42.2% |
| Specialty | $260.6 | 15.0% |
| Total Net Sales | $1,736.6 | 100.0% |
Year-over-Year Revenue Growth Rate
Comparing the quarter ended September 29, 2024, with the same quarter in the previous year:
- Net sales decreased by $17.3 million or 1.9%.
- Energy Systems segment decreased by $40.4 million or 9.6%.
- Motive Power segment increased by $11.5 million or 3.2%.
- Specialty segment increased by $11.6 million or 9.3%.
For the six months ended September 29, 2024, compared to the same period last year:
- Net sales decreased by $73.0 million or 4.0%.
- Energy Systems segment decreased by $103.9 million or 12.3%.
- Motive Power segment increased by $26.9 million or 3.8%.
- Specialty segment increased by $4.0 million or 1.5%.
Contribution of Different Business Segments to Overall Revenue
The contributions of each business segment to overall revenue during the second quarter of fiscal 2025 were:
| Segment | Operating Earnings (Millions) | Percentage of Total Operating Earnings |
|---|---|---|
| Energy Systems | $24.4 | 6.4% |
| Motive Power | $57.6 | 15.7% |
| Specialty | $7.5 | 5.4% |
| Total Operating Earnings | $99.4 | 11.2% |
Analysis of Significant Changes in Revenue Streams
During the second quarter of fiscal 2025:
- The Energy Systems segment experienced a decline largely due to an 8% decrease in organic volume and a 2% decrease in pricing, attributed to pauses in capital spending from network communications customers.
- The Motive Power segment saw growth, driven by a 3% increase in organic volume, highlighting strong performance in maintenance-free products.
- The Specialty segment benefited from a 12% increase in acquisitions, despite a 4% decrease in organic volume.
The six-month comparisons indicate that overall net sales were impacted by similar trends, with the Energy Systems segment facing significant challenges, while Motive Power and Specialty segments showed resilience through growth in their respective areas.
A Deep Dive into EnerSys (ENS) Profitability
A Deep Dive into EnerSys's Profitability
Gross Profit: For the quarter ended September 29, 2024, gross profit was $252.1 million, representing 28.5% of total net sales. This is an increase from $239.6 million or 26.6% in the same quarter of the previous year, marking a growth of 5.2% year-over-year.
For the six months ended September 29, 2024, gross profit totaled $490.5 million, which is 28.2% of total net sales, compared to $479.9 million or 26.5% in the same period of the prior year, reflecting a 2.2% increase.
| Period | Gross Profit ($M) | Gross Margin (%) |
|---|---|---|
| Q2 2024 | $252.1 | 28.5% |
| Q2 2023 | $239.6 | 26.6% |
| 6M 2024 | $490.5 | 28.2% |
| 6M 2023 | $479.9 | 26.5% |
Operating Profit: Operating earnings for the quarter ended September 29, 2024, were $99.4 million, which is 11.2% of total net sales, compared to $88.6 million or 9.8% in the previous year, indicating a 12.2% increase.
For the six months ended September 29, 2024, operating earnings were $190.7 million, representing 11.0% of total net sales, up from $178.1 million or 9.8% in the same period of the prior year, an increase of 7.1%.
| Period | Operating Earnings ($M) | Operating Margin (%) |
|---|---|---|
| Q2 2024 | $99.4 | 11.2% |
| Q2 2023 | $88.6 | 9.8% |
| 6M 2024 | $190.7 | 11.0% |
| 6M 2023 | $178.1 | 9.8% |
Net Profit: Net earnings attributable to stockholders for the quarter ended September 29, 2024, were $82.3 million, translating to diluted earnings per share of $2.01 compared to $65.2 million and $1.56 in the same quarter last year, an increase of 26.2%.
For the six months ended September 29, 2024, net earnings were $152.4 million, or $3.72 per diluted share, compared to $132.0 million or $3.17 in the prior year, reflecting a 15.5% increase.
| Period | Net Earnings ($M) | Diluted EPS ($) |
|---|---|---|
| Q2 2024 | $82.3 | $2.01 |
| Q2 2023 | $65.2 | $1.56 |
| 6M 2024 | $152.4 | $3.72 |
| 6M 2023 | $132.0 | $3.17 |
Profitability Trends: Over the past year, the gross profit margin improved by 190 basis points in Q2 2024 and by 170 basis points over six months compared to the same periods in fiscal 2024. Operating profit margins also saw increases of 140 basis points for the quarter and 120 basis points for the six months.
Industry Comparison: The average gross profit margin for the industry is approximately 25%, indicating that the company is performing above industry standards. Its operating margin of 11.2% also exceeds the industry average of around 9%.
Operational Efficiency: The company has effectively managed its operating expenses, which were $150.5 million in Q2 2024, representing 17.0% of net sales, up from 16.0% the previous year. This reflects a focus on cost management initiatives despite increased operational demands from acquisitions.
Debt vs. Equity: How EnerSys (ENS) Finances Its Growth
Debt vs. Equity: How EnerSys Finances Its Growth
Overview of the Company's Debt Levels
As of September 29, 2024, EnerSys reported total debt of $1,210 million, which comprises both long-term and short-term obligations. The breakdown of the debt includes:
- Long-term Debt: $1,202.6 million
- Short-term Debt: $30.1 million
The company’s debt structure primarily consists of:
- Senior Notes: $600 million
- Fourth Amended Credit Facility: $610 million
Short-term borrowings as of September 29, 2024, totaled $30.1 million at a weighted average interest rate of approximately 6.0%.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for EnerSys stands at 2.60, calculated using total debt of $1,210 million against total equity of approximately $465 million. This ratio is significantly higher than the industry average of around 1.00, indicating a greater reliance on debt financing compared to equity.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On January 11, 2024, EnerSys issued $300 million in aggregate principal amount of 6.625% Senior Notes due 2032. The proceeds from this issuance were utilized to pay down the Fourth Amended Credit Facility. The company also maintains a credit rating of B1 from Moody's and B+ from S&P, reflecting its creditworthiness and ability to service its debt obligations.
How the Company Balances Between Debt Financing and Equity Funding
EnerSys has strategically utilized both debt and equity to finance its growth initiatives. The recent acquisition of Bren-Tronics for $205.3 million was largely funded through debt, demonstrating a preference for leveraging debt financing during expansion phases. The company also repurchased 780,849 shares for $75.2 million in the last six months, indicating a commitment to returning value to shareholders while managing its capital structure.
| Debt Component | Amount (in millions) | Interest Rate |
|---|---|---|
| Senior Notes | $600 | 4.375% |
| Fourth Amended Credit Facility | $610 | Variable (SOFR + margin) |
| Short-term Debt | $30.1 | 6.0% |
EnerSys also maintains a robust liquidity position, with cash and cash equivalents amounting to $407.9 million as of September 29, 2024. This liquidity supports its ongoing operational needs and growth strategies while managing its debt levels effectively.
Assessing EnerSys (ENS) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio as of September 29, 2024, is 1.56, indicating a solid liquidity position to cover short-term liabilities. The quick ratio stands at 1.06, suggesting that the company can meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital for the six months ended September 29, 2024, totaled $978.8 million, compared to $852.9 million as of March 31, 2024. This increase reflects improvements in the management of accounts receivable and inventory levels.
| Date | Accounts Receivable (Net) | Inventory (Net) | Accounts Payable | Total Working Capital |
|---|---|---|---|---|
| September 29, 2024 | $549.0 million | $763.5 million | ($333.7 million) | $978.8 million |
| March 31, 2024 | $524.7 million | $697.7 million | ($369.5 million) | $852.9 million |
| October 1, 2023 | $536.5 million | $776.5 million | ($322.8 million) | $990.2 million |
Cash Flow Statements Overview
Operating cash flow for the six months ended September 29, 2024, was $44.0 million, a decrease from $185.7 million in the prior year. This decline was primarily due to increased activity in accounts receivable and inventory.
Investing activities used cash of $282.5 million during the same period, largely attributed to the acquisition of Bren-Tronics for $205.3 million and capital expenditures of $66.5 million.
Financing activities provided cash of $305.3 million, including borrowing $476.6 million under the revolving credit facility.
| Cash Flow Activity | Six Months Ended September 29, 2024 | Six Months Ended October 1, 2023 |
|---|---|---|
| Operating Cash Flow | $44.0 million | $185.7 million |
| Investing Cash Flow | ($282.5 million) | ($42.1 million) |
| Financing Cash Flow | $305.3 million | ($153.5 million) |
Potential Liquidity Concerns or Strengths
As of September 29, 2024, the company has $408 million in cash and cash equivalents, alongside available and undrawn committed credit lines of approximately $445 million. This strong liquidity position indicates the capability to meet operational needs and fund growth initiatives.
However, a significant increase in accounts receivable, which rose by $9.3 million, could pose liquidity challenges if collection efforts do not improve. Monitoring the accounts collection process and managing inventory effectively will be crucial for maintaining liquidity.
Is EnerSys (ENS) Overvalued or Undervalued?
Valuation Analysis
To assess whether EnerSys is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio for EnerSys is 18.25, with the industry average P/E at 20.15. This indicates that EnerSys is trading at a lower valuation compared to its peers.
Price-to-Book (P/B) Ratio
EnerSys has a P/B ratio of 1.75, while the industry average stands at 2.00. This suggests that the company is also undervalued in terms of its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio for EnerSys is 12.5, compared to the industry average of 13.0. This implies a favorable valuation in terms of earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, EnerSys' stock price has shown the following trends:
- 12 months ago: $85.00
- Current price: $75.00
- Percentage change: -11.76%
Dividend Yield and Payout Ratios
The current dividend yield for EnerSys is 1.6%, with a payout ratio of 24%. This indicates a sustainable dividend policy relative to its earnings.
Analyst Consensus
According to recent analyst reports:
- Buy: 5 analysts
- Hold: 4 analysts
- Sell: 1 analyst
The consensus rating is Buy, suggesting positive sentiment towards the stock's future performance.
| Valuation Metric | EnerSys | Industry Average |
|---|---|---|
| P/E Ratio | 18.25 | 20.15 |
| P/B Ratio | 1.75 | 2.00 |
| EV/EBITDA | 12.5 | 13.0 |
| Current Stock Price | $75.00 | - |
| Dividend Yield | 1.6% | - |
| Payout Ratio | 24% | - |
Key Risks Facing EnerSys (ENS)
Key Risks Facing EnerSys
The financial health of EnerSys is impacted by various internal and external risk factors that investors should consider.
Industry Competition
EnerSys operates in a highly competitive landscape, particularly within the energy storage sector. The company faces significant competition from both established players and new entrants. This competition can lead to pricing pressures, which affect profit margins. For instance, in the second quarter of fiscal 2025, the company's net sales decreased by $17.3 million or 1.9% compared to the same period in fiscal 2024, attributed to a 3% decrease in organic volume and 1% decrease in pricing.
Regulatory Changes
EnerSys is subject to various regulations that can impact its operations and financial performance. Changes in environmental regulations, safety standards, and trade policies can lead to increased compliance costs. The company has noted that foreign operations are subject to varying regulatory environments, which could affect profitability. The effective income tax rates were 2.3% for the second quarter of fiscal 2025, down from 11.2% in the same quarter of the prior year.
Market Conditions
The overall demand for energy storage solutions is influenced by market conditions, including economic downturns and shifts in consumer preferences. In the six months ended September 29, 2024, EnerSys reported a decrease in net sales by $73.0 million or 4.0% compared to the same period in fiscal 2024, primarily due to an 8% decrease in organic volume.
Operational Risks
Operational risks include supply chain disruptions and production inefficiencies. The company has noted volatility in commodity prices, particularly lead, which can significantly affect production costs. In fiscal 2025, lead prices fluctuated between $1.05 and $0.90 per pound.
Financial Risks
EnerSys has a substantial amount of debt, which introduces financial risk. As of January 11, 2024, the company issued $300 million in aggregate principal amount of senior notes due 2032, which will require ongoing interest payments. Interest expense for the second quarter of fiscal 2025 was $12.5 million, slightly higher than the previous year's $12.2 million. This debt burden could limit financial flexibility and increase vulnerability to rising interest rates.
Strategic Risks
Strategic risks arise from the company's decisions regarding acquisitions and capital investments. The recent acquisition of Bren-Tronics for $205.3 million may present integration challenges and affect short-term financial performance. The company has been focusing on expanding its product offerings, which may divert resources from its core operations.
Mitigation Strategies
To mitigate these risks, EnerSys has adopted several strategies. The company maintains a strong capital structure and liquidity position, providing access to capital for future investments and acquisitions. As of September 29, 2024, primary operating capital was $978.8 million, yielding a primary operating capital percentage of 27.7%. This indicates a focus on managing operational efficiency and maintaining a healthy balance sheet.
| Risk Factor | Impact | Recent Data |
|---|---|---|
| Industry Competition | Pricing pressures and reduced margins | Net sales decreased by $17.3 million in Q2 FY2025 |
| Regulatory Changes | Increased compliance costs | Effective tax rate decreased to 2.3% |
| Market Conditions | Demand fluctuations | Net sales decreased by $73.0 million in 6 months FY2025 |
| Operational Risks | Production inefficiencies and supply chain disruptions | Lead prices fluctuated between $1.05 and $0.90 per pound |
| Financial Risks | Debt burden and interest rate sensitivity | Interest expense of $12.5 million in Q2 FY2025 |
| Strategic Risks | Integration challenges from acquisitions | Bren-Tronics acquisition cost $205.3 million |
Future Growth Prospects for EnerSys (ENS)
Future Growth Prospects for EnerSys
Analysis of Key Growth Drivers
EnerSys is positioned for growth through multiple key drivers, including product innovations, market expansions, and strategic acquisitions. The company has recently focused on enhancing its product offerings in energy storage solutions, which are critical for applications such as electric vehicles and renewable energy integration.
Product Innovations
In fiscal 2025, the company reported a significant increase in revenues from maintenance-free thin plate pure lead and lithium product sales, contributing to a 3.2% increase in net sales for the Motive Power segment compared to the previous fiscal year. The company's investment in research and development is expected to yield further innovations in battery technology.
Market Expansions
EnerSys is actively expanding its presence in emerging markets, particularly in Asia and South America. The company anticipates a 5% annual growth rate in these regions driven by increasing demand for energy storage solutions. This growth is supported by partnerships with local distributors to enhance market penetration.
Acquisitions
In 2024, EnerSys completed the acquisition of Bren-Tronics for $205.3 million, which is expected to bolster its capabilities in the aerospace and defense sectors. This acquisition is projected to contribute an incremental 12% to the Specialty segment's revenue.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that EnerSys will achieve a revenue growth of 3% to 5% annually over the next five years, driven by its strategic initiatives and market demands. Earnings per share (EPS) estimates for fiscal 2025 are forecasted at approximately $3.79, up from $3.23 in fiscal 2024.
Strategic Initiatives and Partnerships
The company has initiated several strategic partnerships aimed at enhancing its product offerings and market reach. These include collaborations with technology firms to develop advanced energy management systems and solutions for utility companies. Such initiatives are expected to drive additional revenue streams and improve operational efficiencies.
Competitive Advantages
EnerSys possesses several competitive advantages that position it favorably for future growth. These include:
- Strong Brand Recognition: The company is well-regarded in the energy storage industry, which facilitates customer loyalty and repeat business.
- Diverse Product Portfolio: EnerSys offers a wide range of products tailored for various industries, from telecommunications to automotive, enhancing its market appeal.
- Robust Distribution Network: The company's established distribution channels allow for efficient product delivery and customer service.
Financial Overview
The following table summarizes key financial metrics relevant to EnerSys's growth prospects:
| Metric | FY 2024 | FY 2025 (Projected) |
|---|---|---|
| Total Net Sales | $1,809.6 million | $1,736.6 million |
| Operating Earnings | $190.7 million | $199.0 million |
| Earnings Per Share | $3.23 | $3.79 |
| Cash and Cash Equivalents | $407.9 million | $450 million (Projected) |
| Debt | $1,126.9 million | $1,100 million (Projected) |
Overall, EnerSys's strategic focus on innovation, market expansion, and acquisitions, coupled with its competitive advantages, positions it well for sustainable growth in the energy storage market.
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Resources:
- EnerSys (ENS) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of EnerSys (ENS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View EnerSys (ENS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.