Please ensure Javascript is enabled for purposes of website accessibility

Why EnerSys Stock Dropped 11% on Thursday

By Rich Smith – Updated Apr 23, 2019 at 10:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's swing and an earnings miss in Q3 could soon be repeated.

What happened

Shares of Reading, Pennsylvania-based EnerSys (ENS -0.63%) closed the day down 10.8%, one day after the battery manufacturer reported fiscal Q3 2019 earnings that fell short of expectations.

Analysts had predicted that EnerSys would earn $1.25 per share on sales of $685.8 million in the quarter. Instead, EnerSys reported earnings of only $1.17 per share, pro forma, on sales of just $680 million.

Sparks surround a short-circuiting transformer.

Don't look now, but EnerSys stock just short-circuited. Image source: Getty Images.

So what

Actual GAAP earnings for the quarter were only $1.12 per share, which sounds bad, but was significantly better than the $0.61 per share that EnerSys lost in Q3 of fiscal 2018, a year ago, as a consequence of tax reform. Also, while sales missed estimates, they did grow 3% year over year.

CEO David Shaffer blamed a combination of weak sales to telecom customers who are hoarding cash to pay for "5G network upgrades" currently and "higher than projected freight costs in the quarter."

Check out the latest EnerSys earnings call transcript.

Now what

Looking forward, Shaffer predicted that sales of "DC power products" to telecom customers will pick up later this year. However, the CEO's guidance for pro forma profits of between $1.41 and $1.45 per share in fiscal Q4 (currently underway) nonetheless fell short of consensus analyst predictions for $1.50 per share in pro forma profit.

In other words, not only did EnerSys miss estimates in Q3 but it's planning to miss estimates again in Q4. No wonder investors are selling.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

EnerSys Stock Quote
EnerSys
ENS
$58.57 (-0.63%) $0.37

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.