EnerSys Inc. (ENS) is handling the slowing of its industrial battery business by cutting costs. The company has surprised on estimates 2 out of the last 4 quarters by an average of 37.32%. ENS has a PEG of 0.70.

Company Description

EnerSys is the largest manufacturer of industrial batteries in the world with customers in over 100 countries. Operating for over 100 years, the company makes reserve power, motive power and batteries for the aerospace and defense sectors.

Motive power batteries are used in electric fork trucks and other commercial and industrial electric powered vehicles. Reserve power batteries provide back-up for telecommunications and utility customers.

Cost Control Leads to Easy Surprise in the Third Quarter

On Feb 4, the company reported fiscal third quarter 2009 results which easily beat analysts’ estimates by 57.50%. Net earnings were $30.6 million, or 63 cents per share, compared to Wall Street estimates of 40 cents a share and the company’s own prior guidance of 40 to 44 cents.

EnerSys attributed the earnings beat to cost control and selling price management. Additionally, favorable currency exchange rates boosted EPS by 10 cents per share.

As the global economy contracted, organic net sales fell 10% from the year ago period. Total net sales, including weaker foreign currencies, declined 17% to $460.9 million from $553.4 million in the third quarter of 2008.

In addition to its recent cost cutting initiatives, the company has short term investments of about $91 million and a $200 million line of credit. EnerSys indicated that with its strong balance sheet it intends to actively pursue further acquisition opportunities.

Fourth Quarter 2009 Guidance

Given the global slowdown in demand, the company issued cautious guidance for the fourth quarter in the range of 30 to 34 cents per share.

Consensus Estimates Holding Steady

Given the company’s guidance, fourth consensus estimates have been holding steady for the past 60 days right in the middle of the guidance range at 32 cents per share.

2009 full year estimates are calling for $1.90 per share, up from $1.89. However, 2010 estimates are much lower, most likely because of the global slowdown, at only $1.38 per share.

The company is scheduled to report fourth-quarter 2009 earnings on June 3.

Value Fundamentals

EnerSys Inc. is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 9.97. The company has a price-to-book of 1.01. ENS also sports a 1-year return on equity of 14.42%.

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