EnerSys (NYSE: ENS) reported Q2 EPS of $1.00, $0.02 better than the analyst estimate of $0.98. Revenue for the quarter came in at $708.4 million versus the consensus estimate of $723.61 million.

We exited our 2nd quarter with a renewed sense of optimism as our incoming order rate approached pre-pandemic levels. COVID-19 adversely impacted our revenue in Q2, but lower costs including commodities led to another quarter of strong cash flow. We generated $217M of operating cash flows in H1. We continue to flex manufacturing capacity to match demand, minimizing manufacturing inefficiency while benefiting from raw material cost reductions. The company remains vigilant about employee safety and is monitoring globally any potentially worsening impacts from the pandemic.

Of our three lines of business, Motive Power remains most affected by COVID-19, but is improving rapidly. Our Energy Systems business held up well as telecommunications operators continue to expand their capacity and continue their 5G rollouts in a measured fashion. Cable operators have remained sluggish related to power supply purchases, but have been very active in recent spectrum auctions boding well for the future. Our Specialty business has benefited from several new aftermarket transportation contracts and renewed demand from over-the-road truck manufacturers. Specialty’s defense unit also won several large multi-year development contracts for batteries on guided munitions again this quarter.

To offset the year over year reduction in revenue, we have taken multiple initiatives to flex our operational expenses. These expenses not only decreased by nearly $13 million for the quarter from the prior year, but as a percentage of sales it improved by 60 bps. As a result, in our second fiscal quarter, we halved the decrease in operating earnings as a percentage of sales from the prior year while posting a sequential improvement of 60 bps. In addition, we have announced the restructuring of our Motive Power business in EMEA with the closure of our Hagen, Germany manufacturing facility. We expect this restructuring will allow the company to save nearly $20 million per year, with an anticipated 3.5 year cash payback.

Our new products and other strategic initiatives will soon become significant sources of additional profitability in addition to improved market conditions. This has occurred through tremendous efforts and sacrifices made by EnerSys colleagues during these trying times. We have strengthened measures to protect ourselves against COVID-19, implementing enhanced health and safety protocols at our facilities around the world. Our employees have responded very well to these challenges.

This second quarter closes out a trying first half of our fiscal year 2021. We have weathered significant headwinds while remaining focused on our strategy and execution. We now have the confidence to resume providing guidance for our upcoming fiscal quarter and we expect to achieve as-adjusted earnings of between $1.17 to $1.23 per share in our third fiscal quarter.

David M. Shaffer, President and Chief Executive Officer, EnerSys

GUIDANCE:

EnerSys sees Q3 2021 EPS of $1.17-$1.23, versus the consensus of $1.17.

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