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Can EnerSys (ENS) Continue the Bull Run on Thriving Markets?


Premium battery manufacturer, EnerSys ENS, has been experiencing a solid run on the bourse and has appreciated a whopping 41.3% year to date. The company’s thriving motive power & reserve power businesses, along with its leading position in the lead-acid battery market, make us optimistic of further potential upside in the stock price.

Let’s discuss the company’s growth drivers and potential catalysts that will drive the stock higher.

What is Driving the Stock Upward?

One of the dominant players in the global lead-acid battery market, EnerSys has a projected compounded annual growth rate of 4.6% during 2014–2020, according to “FMI” future market research. Both the company’s segments namely, Motive Power and Reserve Power, have been witnessing solid momentum. A consistent rise in the orders of both the segments signals bright prospects ahead.

Asiais expected to be one of the strongest growth drivers for the Motive Power business, fuelled by the ongoing conversion of internal combustion system to electronic process in trucks. Also, robust sales of thin plate pure lead, gel, high-frequency chargers and battery management systems in key end markets is likely to propel growth. The Reserve Power business is also faring well, driven by strong demand from truck fleet operators. EnerSys remains bullish that additional fleets will start using its batteries for starting their engine in auxiliary power unit.

Moreover, the company is eyeing opportunities to expand its Odyssey battery sales into the retail sector. This apart, EnerSys’ restructuring initiatives, aimed at transforming the organization into a leaner one, bode well for the company’s future growth. Presently, it is focusing on reducing the costs of goods sold permanently by a minimum of 2% or $35 million, by the end of fiscal year 2019. These savings are anticipated to be supported by eliminating waste, increasing productivity and reducing costs.

In addition, the company is diligently focusing on driving organic growth through cycle time compression. Moreover, in a bid to grab a higher market share, EnerSys has plans to launch premium products in nickel, zinc and lithium batteries. It has also been eyeing the low-price telecom business in China to supplement top-line growth. Further, the company’s sound financial health and strategic acquisitions to boost core business areas add to its strength.

Bullish Key Statistics

The company has been witnessing solid activity on the earnings estimate revision front. Analysts have become increasingly bullish on the company over the past month, as the Zacks Consensus Estimate for fiscal 2017 earnings has sharply trended up in the past month, from $4.39 to $4.58 per share, on the back of one upward estimate revision versus no lower.

Further, this Zacks Rank #1 (Strong Buy) company boasts a Zacks Momentum Style Score of A. Our research shows that stocks with a Momentum Style Score of ‘A’ or ‘B’, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential in the short term.

Other Stocks to Consider

Other favorably placed stocks in the broader sector include II-VI Incorporated IIVI, Applied Industrial Technologies Inc. AIT and The Middleby Corporation MIDD. While II-VI Incorporated sports the same Zacks Rank as EnerSys, Applied Industrial and Middleby Corporation carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

II-VI Incorporated has registered a remarkable positive average surprise of over 39.8% in the four trailing quarters, driven by four strong consecutive beats.

Applied Industrial Technologies has managed to beat estimates twice in the trailing four quarters and has a positive earnings surprise of 4.9%.

Middleby Corporation beat earnings in each of the trailing four quarters, resulting in an average surprise of 15.9%.

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