Battery manufacturer EnerSys (NYSE:ENS) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 7% year on year to $974.8 million. Its non-GAAP EPS of $2.97 per share was 6.8% above analysts’ consensus estimates.
Revenue: $974.8 million vs analyst estimates of $973.5 million (7% year-on-year growth, in line)
Adjusted EPS: $2.97 vs analyst estimates of $2.78 (6.8% beat)
Adjusted EBITDA: $166.9 million vs analyst estimates of $160.8 million (17.1% margin, 3.8% beat)
Revenue Guidance for Q2 CY2025 is $850 million at the midpoint, below analyst estimates of $913.8 million
Adjusted EPS guidance for Q2 CY2025 is $2.08 at the midpoint, below analyst estimates of $2.40
Operating Margin: 13.5%, up from 8.9% in the same quarter last year
Free Cash Flow Margin: 10.8%, down from 12% in the same quarter last year
Sales Volumes rose 4% year on year (-7% in the same quarter last year)
Market Capitalization: $3.26 billion
StockStory’s Take
EnerSys' fourth quarter fiscal 2025 results reflected a mix of market recovery and ongoing volatility across its core businesses. Leadership cited continued strength in data center demand and aerospace and defense, as well as robust growth in maintenance-free battery offerings. CEO David Shaffer emphasized the company's progress in expanding higher-margin product lines and successful cost optimization efforts, while incoming CEO Shawn O’Connell noted that customer enthusiasm for its maintenance-free offerings, which “help them address their labor challenges,” was a key contributor to strong performance in the Motive Power segment. CFO Andrea Funk highlighted the positive impact of the Brentronics acquisition, which helped offset flat volumes in some segments. Management remained cautious about the unpredictable demand patterns stemming from ongoing tariff changes and supply chain adjustments.
Looking ahead, EnerSys is focused on navigating policy uncertainty, particularly surrounding tariffs, while executing on margin improvement and strategic investments. Shawn O’Connell described the company’s approach as “a disciplined execution as we move through a transitional period shaped by evolving macro and policy dynamics.” Management believes that ongoing investments in manufacturing efficiency, increased domestic production, and new product introductions such as the Cenova Sync charger and battery energy storage system will underpin future growth. However, executives cautioned that temporary headwinds from “stranded tariffs” and demand swings could weigh on near-term results, and stated that full-year guidance is paused until greater clarity emerges around trade policy and broader industrial sector trends.
Key Insights from Management’s Remarks
Management attributed performance this quarter to execution on margin expansion, new product adoption, and selective end-market recovery, but flagged volatility in customer ordering due to tariff disruptions.
Data Center and Defense Growth: EnerSys saw meaningful momentum in data centers and aerospace and defense (A&D) markets, with data center revenues up and the Brentronics acquisition driving robust demand for soldier power systems. Management credited these segments for offsetting weaker transportation and industrial volumes.
Maintenance-Free Product Adoption: Customer demand for maintenance-free battery solutions, which help address labor scarcity, reached a record 29% of Motive Power segment revenue. The company highlighted strong quote rates and ongoing conversion as key tailwinds for future growth.
Tariff Disruptions and Mitigation: Leadership established a cross-functional task force to manage the impact of evolving tariffs. Roughly 5% of U.S. supply is sourced from China, and management expects some near-term friction from “stranded tariffs” that cannot be immediately passed on to customers, but aims to fully offset these costs through operational discipline.
Manufacturing Optimization: The closure of the Monterrey, Mexico plant and consolidation into Richmond, Kentucky is expected to yield $19 million in annual pre-tax savings by 2027. Management also cited investments in high-speed domestic production lines as critical to cost structure improvements.
Volatile Order Patterns: EnerSys reported that customer orders were highly variable week-to-week, especially in Motive Power and transportation, as buyers reacted to tariff news. While order rates appear to be normalizing, management cautioned that volatility may persist until there is policy clarity.
Drivers of Future Performance
EnerSys’ outlook is shaped by macro uncertainty around tariffs, strategic focus on margin expansion, and targeted growth investments in key markets and products.
Tariff and Policy Uncertainty: Management paused full-year guidance due to ongoing ambiguity over reciprocal tariff negotiations and potential downstream effects on industrial demand. Executives stated that future results hinge on “how these holds on the temporary and the reciprocal tariffs kind of wind down.”
Margin Expansion Initiatives: The company expects operating earnings growth (excluding tax credits) to outpace revenue, driven by higher-margin product mix, ongoing cost controls, and further operational efficiencies. Leadership is implementing direct and indirect cost controls and reviewing additional reductions in operating and capital expenditures.
Product and Market Investments: EnerSys is prioritizing domestic manufacturing capacity, accelerated rollout of maintenance-free and software-driven products, and increased service capabilities. The company is also closely monitoring developments in its lithium battery manufacturing investments, with potential upside tied to Department of Energy funding and defense sector demand.
Catalysts in Upcoming Quarters
Key factors to watch in the coming quarters include (1) the resolution of tariff policy negotiations and their impact on order stability, (2) the pace of margin expansion from manufacturing optimization and product mix, and (3) progress on new product launches and domestic lithium battery investments. Cost control execution and service revenue growth will also be important measures of management’s ability to navigate a volatile macro environment.
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