What Enersys (ENS) Said on Its Q2 Earnings Call

Key Points

• Earnings and margins improved despite flat sales: Revenue was about $950 million, while adjusted EPS excluding tariff refunds rose 23% to $3.26 and adjusted operating margin expanded to 16.2%.
• Defense and data centers offset material handling weakness: Precision Power Solutions revenue grew 21%, and Network and Infrastructure Solutions revenue rose 3% with double-digit data center growth. Industrial Mobility revenue fell 8% as material handling orders remained soft.
• EnerSys is expanding its defense business and expects steady near-term results: It agreed to acquire Ultralife for about $320 million and expects $15 million to $20 million in annual cost synergies. For fiscal Q3, it forecast sales of $935 million to $975 million and adjusted EPS of $3.05 to $3.15.

Enersys NYSE: ENS reported higher earnings and margins in its fiscal second quarter despite nearly flat sales, as defense and data center demand helped offset continued weakness in material handling.

The battery and power solutions company reported revenue of $950 million, roughly unchanged from a year earlier. Adjusted diluted earnings per share, excluding the impact of tariff refunds, rose 23% to $3.26. Adjusted operating earnings on the same basis increased 15% to $154 million, with the margin expanding to 16.2% from 14.1%.

Chief Financial Officer Andi Funk said sales came in at the low end of the company’s guidance range before foreign exchange effects because material handling delays lasted longer than expected. Excluding both tariff refunds and benefits from the federal Section 45X tax credit, adjusted earnings per share rose 28% to $2.06.

Defense Growth Offsets Material Handling Weakness

Precision Power Solutions, which includes aerospace and defense products, posted a 21% increase in revenue to $104 million. Its adjusted operating margin expanded to 21.9% from 18.5%, supported by higher defense battery volumes and favorable pricing and product mix.

President and Chief Executive Officer Shawn O’Connell said the segment’s orders rose 203% year over year on program awards. The company secured about $15 million in funding to expand munitions battery production capacity and received a $50 million multiyear European order for soldier power solutions.

Network and Infrastructure Solutions revenue rose 3% to $449 million, while its adjusted operating margin increased to 11.2% from 8.3%. Data center sales grew by double digits, O’Connell said, and the data center backlog more than doubled. Communications sales were flat year over year despite continued demand for electronics supporting DOCSIS 4.0 network upgrades.

Industrial Mobility Solutions revenue fell 8% to $397 million, and its adjusted operating margin declined to 9.5% from 10.1%. Strong transportation demand only partly offset softer material handling sales. O’Connell said material handling orders were down by a low-single-digit percentage year over year.

Management expects more consistent signs of a material handling recovery in the fourth fiscal quarter and into fiscal 2028. O’Connell pointed to rising orders reported by a lift-truck manufacturer and said battery sales typically follow truck orders by a few months. Funk said a higher proportion of transportation sales, which carry lower margins than material handling products, is expected to pressure the segment’s margins in the near term.

Ultralife Deal and Product Launches

EnerSys has agreed to acquire battery technology provider Ultralife for an enterprise value of approximately $320 million, funded with cash on hand. The proposed deal is expected to close in the first quarter of calendar 2027, subject to customary conditions and regulatory approvals.

O’Connell said Ultralife’s lithium technologies and manufacturing capabilities would expand EnerSys’ defense offerings, including for drone and counter-drone applications. The company plans to integrate Ultralife into Precision Power Solutions and expects $15 million to $20 million in annual run-rate cost synergies within 18 months of closing. It also expects the transaction to add to adjusted earnings per share within that period.

EnerSys received its first customer order for DataSafe Noir, its lithium backup-power offering, from a provider serving major sporting and entertainment events. O’Connell said the product could expand the company’s participation in new data center construction, while its existing lead-acid batteries continue to serve established facilities.

Funk said DataSafe Noir was not expected to be a material contributor in the current fiscal year. The company also recognized its first revenue from its next-generation lithium offering for material handling during the quarter.

Outlook and Cash Flow

For the fiscal third quarter, EnerSys forecast net sales of $935 million to $975 million and adjusted diluted earnings per share of $3.05 to $3.15. The outlook excludes tariff refunds, any customer reimbursements of refunds and the impact of the proposed Ultralife acquisition.

Funk said the forecast reflects strength in aerospace and defense, data centers and transportation, along with improving communications demand and an early material handling recovery. She also cautioned that freight and commodity inflation could take a quarter to recapture and that project timing could create quarterly margin fluctuations.

EnerSys generated $130 million in free cash flow during the second quarter and $348 million in the first half of the fiscal year. It repurchased $130 million of shares during the quarter and approximately $40 million more after quarter-end through Nov. 6. The company ended the quarter with $276 million in cash and cash equivalents and $555 million in net debt.

About Enersys (NYSE:ENS)

EnerSys NYSE: ENS is a global provider of stored-energy solutions for industrial applications. Its products include batteries, chargers, power-conversion equipment and energy-storage systems, along with related services such as installation, maintenance and recycling. The company serves customers in markets including material handling, telecommunications, data centers, utilities, aerospace and defense, and transportation. Its offerings include lead-acid and lithium-ion batteries and other power systems designed for applications ranging from forklifts and other industrial vehicles to backup and grid-support power.

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