Shares of EnerSys (NYSE:ENS) remained volatile in early trading on Thursday, after the company Wednesday reported its fiscal second-quarter results
Demand from data centers and the aerospace and defense (A&D) segment continued to drive momentum, while an upcoming acquisition could help the company grow market share in a key end market, according to BTIG analyst Gregory Lewis.
The EnerSys Analyst: Lewis maintained a Buy rating but cut the price target from $280 to $250.
The EnerSys Thesis: While the company’s IMS (Industrial Mobility Solutions) business division is expected to experience continued margin pressure, the PPS (Precision Power Solutions) and NIS (Network & Infrastructure Solutions) segments are likely to face ongoing tailwinds, Lewis said in the note.
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Lewis highlighted the following from EnerSys’ quarterly print:
- Adjusted earnings of around $3.22 per share came in above consensus of about $3.19 per share.
- Revenue of $950 million missed Street expectations of about $964 million.
- IMS struggled as material handling demand weakened.
- NIS and PPS reported strong results as data centers and A&D continued to drive growth.
Management guided to fiscal third-quarter earnings of $3.05-$3.15 per share, bracketing consensus of around $3.10 per share, the analyst noted. Comps are getting tougher due to the recent strength of the NIS and PPS segments, he added.
Management projected revenue of $935-$975 million, versus consensus of around $968 million, with A&D and data centers expected to continue driving growth “while material handling begins to see early stages of recovery, which should translate into Y-Y growth in IMS,” Lewis wrote.
Ultralife, a specialized battery producer, helps EnerSys grow its market share in defense, one of the company’s fastest-growing sectors. The company expects to realize around $15-$20 million in annual cost synergies within the first 18 months of closing, expected in the fiscal fourth quarter.
EnerSys has an “advantageous” balance sheet, Lewis said. It should provide the company with “significant room” for organic growth and M&A opportunities to return cash to shareholders, he added.
ENS Price Action: Shares of EnerSys had declined by 0.18% to $147.35 at the time of publication on Thursday.
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