EnerSys (ENS) recently delivered its 3rd consecutive positive earnings surprise as strength in the Americas and Asia more than offset softness in Europe.
Analysts revised their estimates higher going forward, sending the stock to a Zacks #1 Rank (Strong Buy). Despite strong earnings momentum, shares trade at just 9x forward earnings and sport a PEG ratio of 0.7.
Company Description
EnerSys is the largest manufacturer of industrial batteries in the world with customers in over 100 countries. It operates in two segments: Reserve Power (48% of revenue) and Motive Power (52% of revenue).
Reserve Power products are used for backup power in a variety of applications, and Motive Power products are used primarily in electric forklift trucks, mining equipment, and for diesel locomotive starting equipment.
The company was founded in 1999 and is headquartered in Reading, Pennsylvania. It has a market cap of $1.5 billion.
Fourth Quarter Results
EnerSys reported strong fourth quarter results on May 29. Earnings per share came in at 98 cents, beating the Zacks Consensus Estimate of 95 cents. It was a 31% increase over the same quarter last year.
Net sales rose 8% year-over-year to $593 million, ahead of the Zacks Consensus Estimate of $584 million. This was driven by a 3% increase in organic volume, a 2% increase in pricing, a 4% increase from acquisitions and a 1% decrease in foreign currency effects.
From a geographic perspective, sales growth in the Americas and Asia more than offset softness in Europe.
Outlook
Following strong Q4 results, management stated that orders in fiscal 2013 have been trending positively and that it expects continued strong operating results in the first quarter of fiscal 2013. This prompted analysts to revise their estimates higher for both 2013 and 2014, sending the stock to a Zacks #1 Rank (Strong Buy) stock.
As you can see in the company’s Price & Consensus chart, consensus estimates have been steadily rising over the last several months as it has delivered 3 straight positive earnings surprises:
Based on current consensus estimates, analysts are projecting strong earnings growth from EnerSys over the next few years. The Zacks Consensus Estimate for 2013 is now $3.50, representing 16% growth over 2012 EPS. The 2014 consensus is currently $3.83, corresponding with 9% growth.
Attractive Valuation
Despite its strong earnings momentum, shares of ENS trade at just 9x 12-month forward earnings, a discount to its historical median of 14x. Its price to cash flow ratio is 8x, below its historical multiple of 9x.
Based on a consensus 5-year EPS growth rate of 13%, its PEG ratio is an attractive 0.7.
The Bottom Line
With strong earnings momentum, solid growth projections and very reasonable valuation, EnerSys offers a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.
