EnerSys Reports Record Earnings Amid Tariff Challenges

EnerSys ((ENS)) has held its Q4 earnings call. Read on for the main highlights of the call.

EnerSys Earnings Call Reflects Strong Performance Amid Challenges

EnerSys recently held its earnings call, revealing a generally positive sentiment with record earnings and revenue growth. The company showcased significant progress in its maintenance-free products and benefited from strategic acquisitions. Despite these achievements, EnerSys faces challenges, including tariff exposure, delays in tax refunds, and market uncertainties, particularly impacting the Motive Power and Transportation segments.

Record Adjusted Diluted EPS and Revenue Growth

EnerSys reported a record adjusted diluted EPS of $1.86, excluding 45x benefits, and a 7% revenue growth, marking the second-highest revenue quarter in the company’s history. This performance underscores EnerSys’s ability to achieve substantial financial growth.

Motive Power Margins and Maintenance-Free Products

The company achieved record margins in the Motive Power segment, with maintenance-free products accounting for a record 29% of segment sales. This contributed to a 15% earnings growth on similar volumes compared to the previous year, highlighting the success of their product strategy.

Specialty Segment Growth

EnerSys’s Specialty segment experienced robust growth, driven by strengths in the Aerospace and Defense markets and the Brentronics acquisition. The acquisition alone contributed a 22% positive impact, showcasing the strategic value of this investment.

Energy Systems Segment Performance

The Energy Systems segment nearly doubled its adjusted operating earnings, with a 22% year-over-year increase in quarterly data center revenue. This growth is complemented by signs of recovery in U.S. communications spending, indicating a positive outlook for this segment.

Strong Cash Flow and Balance Sheet

EnerSys generated a positive operating cash flow of $135 million, resulting in a free cash flow of $105 million. The company concluded the year with $343 million in cash and cash equivalents, reflecting a strong financial position.

Tariff Exposure and Uncertainty

The company faces approximately $92 million in direct tariff exposure, down from $160 million previously. However, potential near-term friction is anticipated in Q1 due to stranded tariffs that cannot be passed on to customers, posing a challenge to the company’s financial strategy.

Challenges in Motive Power and Transportation

EnerSys anticipates pressure on Motive Power volumes due to seasonality and tariff disruptions, with Q4 orders down 14% year-over-year. The lower starting backlog compared to a year ago and last quarter further complicates the outlook for this segment.

Delay in US Tax Refund

The company has yet to receive a $107 million US tax refund expected in Q4, attributed to IRS staffing issues. While interest will accrue on the delayed refund, this delay poses a temporary financial inconvenience.

Supply Chain and Tariff-Related Disruptions

Volatility and uncertainty from evolving tariff and macroeconomic dynamics have led EnerSys to temporarily pause its quantified full-year guidance, reflecting the challenges in forecasting amidst these disruptions.

Forward-Looking Guidance

EnerSys provided forward-looking guidance, expecting first-quarter fiscal 2026 net sales to range between $830 million to $870 million, with an adjusted diluted EPS of $2.03 to $2.13, including $35 million to $40 million of 45x benefits. The company remains committed to navigating the challenging macroeconomic environment and mitigating tariff impacts while maintaining a strong balance sheet.

In summary, EnerSys’s earnings call highlighted a strong financial performance with record earnings and revenue growth. The company demonstrated resilience through strategic acquisitions and product innovations, despite facing challenges such as tariff exposure and market uncertainties. Looking ahead, EnerSys remains focused on sustaining its growth trajectory while addressing the macroeconomic challenges that lie ahead.