What's Powering EnerSys Shares Higher?

On Tuesday, EnerSys (ENS +1.09%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Batteries have become incredibly important throughout the economy, with applications ranging from small power sources for handheld electronic devices to huge power systems to serve the needs of industrial manufacturers. EnerSys helps serve those needs with a diverse line of power products for utilities, energy companies, aerospace, and defense, as well as general manufacturing and transportation. Let's take an early look at what's been happening with EnerSys over the past quarter and what we're likely to see in its quarterly report.

Stats on EnerSys

Source: Yahoo! Finance.

How will EnerSys fare with earnings this quarter?
EnerSys has seen analysts offer mixed views on the company's earnings in recent months, with a boost in expected earnings for the March quarter but a $0.06 reduction in views for the current 2014 fiscal year. The stock has done well, however, rising 15% since mid-February.

We've already gotten a good sense from EnerSys about its coming earnings report from the preliminary estimates it released earlier this month. The company managed to report better earnings than its previous guidance had suggested, even though revenue fell 4% from the previous-year's quarter. But the report gave somewhat disappointing future guidance, with charges from restructuring programs further weighing on its outlook for the current quarter.

The battery industry lately has been fraught with peril for investors. Exide Technologies, which shared a victory with EnerSys in March when the Defense Department awarded contracts worth nearly $50 million each to both companies to produce batteries for its submarine fleet, has seen its share price plunge in light of concerns about its financial situation. Meanwhile, lithium-ion battery maker A123 Systems went bankrupt last October, as it sought to grow too quickly in a promising market for electric vehicles that didn't see a fast-enough ramp-up in revenue to keep the company afloat.

Yet one area of huge potential for EnerSys is in its OptiGrid service, which seeks to help utilities and other power-grid users stabilize their grids and improve efficiency. In April, the company said it expects to see a commercial system ready for purchase orders within the next 12 to 14 months. The passage of an Illinois bill earlier this week that will allow Exelon (EXC 1.54%), Ameren (AEE 0.20%), and other area utilities to pass on part of the costs they incur in improving and modernizing the power grid to incorporate smart-grid technology, demand for the OptiGrid product should be strong when it's available.

Still, EnerSys has to move quickly, given previous efforts from larger companies in the space. In particular, General Electric (GE 0.44%) has made energy infrastructure a high priority in its overall business plan, and with the conglomerate already having a substantial presence in electrical-grid applications, GE exerts its influence throughout the industry in a way that EnerSys will need to navigate carefully in order to find its niche.

In EnerSys's quarterly report, the numbers shouldn't draw much attention unless they differ greatly from preliminary guidance. Far more important will be what the company has to say about its various initiatives going forward. Capitalizing on growth opportunities will be essential for EnerSys to keep its stock moving in the right direction.

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