Enersys Q4 Earnings Call Highlights

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Enersys (NYSE:ENS) reported record fourth-quarter adjusted earnings per share and record full-year sales for fiscal 2026, with management pointing to pricing, operating expense discipline, tax credit benefits and share repurchases as key contributors despite softer demand in some industrial markets.

President and Chief Executive Officer Shawn O'Connell said the company delivered its “highest quarterly adjusted EPS, with and without 45X,” on its second-highest quarterly revenue and strong free cash flow. For the full year, he said EnerSys achieved record sales, adjusted gross profit, adjusted operating earnings and adjusted diluted earnings per share before the benefit of 45X tax credits.

O'Connell said the results were notable because they came during a year in which demand in electric forklifts and transportation was down. He credited the company’s strategic framework, diversified business model and improved execution for the performance.

Fourth-quarter sales rise as price mix offsets lower volumes

EnerSys reported fourth-quarter net sales of $988 million, up 1% from the prior year. Executive Vice President and Chief Financial Officer Andi Funk said the increase was driven by a 4% benefit from price mix and a 3% benefit from foreign currency translation, partially offset by a 6% decline in organic volumes. She noted that the prior-year quarter benefited from some customers pulling volume forward ahead of announced tariffs.

Adjusted gross profit was $292 million, down $12 million, or 4%, from a strong prior-year period. Funk said higher freight, tariffs and inflationary costs weighed on results, with those costs up $20 million year over year after the company produced more products “in region for region.” Adjusted gross margin was 29.5%, down 170 basis points including 45X benefits and down 190 basis points excluding 45X.

Operating expense improved by $14 million year over year, reflecting cost reduction initiatives. Adjusted operating earnings were $154 million, up 1% from the prior year, with an adjusted operating margin of 15.6%. Excluding 45X benefits, adjusted operating earnings were roughly flat, with a 10.9% adjusted operating margin.

Adjusted diluted EPS was a record $3.19, up 7% from the prior year. Excluding 45X benefits, adjusted EPS was also a record at $1.96, up 5%.

For fiscal 2026, net sales reached $3.8 billion, an all-time high and up 4% year over year. Adjusted operating earnings were $540 million, including $159 million from IRC 45X tax credits. Excluding those benefits, adjusted operating profit was a record $382 million, with a full-year adjusted operating margin of 10.2%. Adjusted diluted EPS was $10.56, while adjusted diluted EPS excluding 45X was $6.41.

Segment performance mixed, with strength in energy systems and specialty

In the Energy Systems segment, fourth-quarter revenue rose 7% year over year to $426 million. Funk said the increase reflected strong price mix, positive foreign exchange impact and volume growth in power electronics. Adjusted operating earnings increased 23% to $42 million, and adjusted operating margin expanded 130 basis points to 10%. She cited record sales of the company’s flagship XM products, though she said those levels may not continue at the same elevated pace.

Motive Power revenue fell 6% to $370 million, reflecting lower volumes from continued market softness, partly offset by foreign exchange tailwinds and favorable price mix. Adjusted operating earnings declined 21% to $53 million, and adjusted operating margin fell 280 basis points to 14.2%. Funk said higher freight and tariff costs and lost leverage from lower volumes offset OpEx savings and price mix improvements. Maintenance-free products represented 30.4% of Motive Power revenue, up from 29.3% a year earlier.

Specialty revenue increased 8% to $192 million, driven by favorable price mix, particularly in aerospace and defense, early contributions from the Rebel acquisition and foreign exchange tailwinds, partly offset by lower transportation volumes. Adjusted operating earnings rose 20% to $18 million, and adjusted operating margin increased 90 basis points to 9.4%. Funk said transportation sales were down high single digits, but orders were up more than 30% year over year, suggesting “an early but bumpy start” to a demand recovery.

Cash flow, buybacks and balance sheet remain priorities

EnerSys generated operating cash flow of $144 million in the fourth quarter. After $13 million of capital expenditures, free cash flow was $131 million, up $26 million from the prior-year quarter. For the full year, free cash flow was $468 million.

As of March 31, 2026, EnerSys had $440 million in cash and cash equivalents. Net debt was $684 million, down about $100 million from the end of fiscal 2025, and leverage was 1.1 times EBITDA, below the company’s target range of two to three times.

Funk said capital expenditures totaled $80 million in fiscal 2026, and the company expects about $70 million in fiscal 2027 as heavier investments in TPPL capacity flexibility are completed. During the fourth quarter, EnerSys repurchased 410,000 shares for $69 million at an average price of about $171 per share and paid $9.6 million in dividends. The company had about $876 million remaining under its buyback authorization as of May 20.

Strategic actions include plant closures and lithium initiatives

O'Connell said EnerSys is seeing benefits from its strategic framework, including efforts to optimize its manufacturing footprint. The company announced the closure of its Tijuana, Mexico facility and plans to shift production to Springfield, Missouri, which it expects will generate about $20 million of incremental 45X benefits beginning in fiscal 2028.

EnerSys also substantially completed the previously announced closure of its Monterrey, Mexico plant, which management expects to yield about $19 million of savings in fiscal 2027. O'Connell said the projects are intended to optimize manufacturing, maximize 45X benefits, support higher-margin solutions and reduce future tariff risks.

The company also advanced two product priorities into customer commissioning during the quarter: a lithium data center solution and battery energy storage solutions for warehouse operators. In response to an analyst question, O'Connell said the company has shipped finished products to customers, though he said meaningful revenue lift is not expected until fiscal 2028 as OEM handoffs and customer validation processes continue.

O'Connell said EnerSys has re-scoped its planned lithium cell factory in Greenville, South Carolina, with a greater focus on customers that value secure, domestic and FEOC-compliant supply chains, particularly in aerospace and defense. He said the company is in the final stages of the Department of Energy grant process and expects a more focused manufacturing footprint, though he did not disclose additional details while the award process remains incomplete.

Management offers cautious optimism for fiscal 2027

Management described end-market conditions as encouraging but dynamic. O'Connell said EnerSys is seeing strong momentum in data centers, communications and defense applications, while forklift and transportation markets remain softer but are improving. Fourth-quarter book-to-bill was 1.1, the company’s highest in nearly four years, with orders outpacing revenue across all lines of business.

In communications, O'Connell cited strong orders and record shipments for broadband power supplies, driven by DOCSIS 4.0 buildouts. In data centers, he said demand remains healthy as customers invest in AI infrastructure and expansion, with the company’s TPPL technology suited to high-rate, short-duration discharge needs.

EnerSys expects first-quarter fiscal 2027 net sales of $915 million to $955 million. Adjusted diluted EPS is expected to be $2.80 to $2.90, including $42 million to $47 million of 45X benefits to cost of sales. Excluding 45X, adjusted diluted EPS is expected to be $1.61 to $1.71.

For the full year, Funk said the company continues to expect adjusted operating earnings growth, excluding 45X benefits, to outpace revenue growth, supported by operating expense discipline, price mix strength and stable or improving markets across its businesses.

About Enersys (NYSE:ENS)

Enersys, headquartered in Reading, Pennsylvania, is a global leader in stored energy solutions, specializing in manufacturing and distributing industrial batteries, battery chargers, power equipment, and related accessories. The company serves a diverse range of end markets, including telecommunications, data centers, medical, aerospace, defense, electric vehicle motive power, and utility outcomes. Its products are engineered to deliver critical reserve power and motive power applications across key infrastructure and industrial sectors.

The company's product portfolio encompasses lead-acid batteries, lithium-ion energy storage systems, chargers, inverters, power management software, and a broad array of battery accessories.

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