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BERN TWP., Pa. – Was it just coincidence or did EnerSys know in advance that its stock price would hit a 52-week high of $106.65 just one day in advance of its Investor Day Presentation June 15 in New York City?
EnerSys’ stock was trading at $105.24 midday Thursday.
The company’s executive management team spoke at the hybrid event hosted in-person and via webcast and they couldn’t be blamed about feeling positive about their fiscal year 2023 results and strategic plans for the future. Presentations covered market opportunities, profitable growth drivers, new product initiatives, sustainability, and capital allocation priorities to deliver long-term shareholder value.
On May 30, EnerSys, the manufacturer of stored energy solutions for industrial applications, with headquarters in Berks County, reported record financial results for its fiscal year 2023. Management reminded the analysts and others present at Investor Day that the company had sales of $3.709 billion, adjusted operating earnings of $322 million and adjusted diluted earnings per share of $5.34, all records. Going forward, the company is looking at a healthy $1.3 billion backlog.
The Investment Rationale
President & CEO David M. Shaffer explained the EnerSys investment case. He said the company is a provider of highly differentiated energy solutions and has a full suite of technologies for a diverse set of end markets. He believes EnerSys is strategically aligned to large and growing markets fueled by industry megatrends.
Financially, Shaffer pointed to a healthy balance sheet with ample flexibility to invest in its business and the company’s position for accelerated earnings growth when market conditions normalize. He also claimed a strong leadership team focused on delivering long-term shareholder value.
The company experienced a technology-driven portfolio transformation since 2017, Shaffer claimed. Six years ago, it was a traditional lead acid battery maker with a narrow set of markets. Now, through expansion of its TPPL (Thin Plate Pure Lead) product line and the launch of a lithium platform, the company offers integrated technology solutions across energy storage, power and electronics, and software and services with broad exposure to a wide range of end markets.
Fighting inflation
How EnerSys plans to address the current inflationary cycle was addressed by Andi Funk, EVP and Chief Financial Officer. She said that a slowdown was not yet evident in the business, but the company was vigilant. She pointed to a deep history of disciplined cost management and cash generation in recessionary periods. Revenue from the Motive Power line would be most exposed.
Compared to the 2009 recession, according to Funk, if one occurs in 2023, it would be different. The backlog and pent-up demand would delay or soften the decline. Stable or lower costs would drive catch-up profit improvement, she claimed. The company would normalize its inventory investment, and supply chain normalization would offer a product mix benefit. In addition, the Energy Systems line operates independently of shifts in the GDP.
Funk also touched on capital allocation for the year. The company expects to invest around $90 million in organic growth and has no plans for any acquisitions. It plans to pay about $28 million in dividends and $23 million for stock repurchases and has over $340 million cash and cash equivalents.
Sustainability
EnerSys also provided insights into its Sustainability goals. Among its major aspirations the company is targeting, using 2020 as a benchmark, a 25% reduction in energy intensity by 2030; targeting a 25% reduction in water intensity by 2030; and targeting greenhouse gas Scope 1 neutrality by 2040 and Scope 2 by 2050. The company plans to announce a comprehensive plan by August 2024.
In addition, EnerSys intends to Increase its female representation at the leadership level from 9% in 2021 to 20% in 2025; increase its representation of multicultural talent in the U.S. at the leadership level from 16% in 2021 to 25% in 2025; and aspires to become recognized by at least three global indexes as a leading employer by 2025.
About EnerSys
EnerSys (ENS) is a leader in stored energy solutions for industrial applications, manufactures and distributes energy systems solutions and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure solutions to customers worldwide. EnerSys also provides aftermarket and customer support services to its customers in over 100 countries through its sales and manufacturing locations around the world. With the NorthStar acquisition, EnerSys says it has solidified its position as the market leader for premium Thin Plate Pure Lead batteries which are sold across all three lines of business.
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