READING, PA — EnerSys (NYSE: ENS) more than doubled its first-quarter profit to $116.5 million as stronger demand from data centers, communications providers and defense customers offset continued weakness in material handling, prompting the battery manufacturer to raise its dividend and project higher second-quarter sales.
Net income increased from $57.5 million a year earlier, while diluted earnings climbed 112% to $3.09 per share from $1.46 during the quarter ended July 5.
Revenue rose 4.8% to $935.6 million from $893 million, landing within management’s projected range of $915 million to $955 million.
The sales increase included a 3% contribution from higher prices, a 1% benefit from currency translation and a 1% increase in organic volume.
Adjusted earnings increased 64% to $3.66 per share from $2.23, exceeding the company’s earlier forecast of $2.80 to $2.90.
The prior guidance did not include changes involving stock-based compensation that contributed 16 cents per share.
Results also included $30.9 million in tariff refunds. Excluding advanced manufacturing tax credits and those refunds, adjusted earnings increased 42% to $1.78 per share.
Adjusted earnings excluding only the manufacturing credits rose 92% to $2.41 per share.
Gross margin expanded to 33.5%, an increase of 5.1 percentage points. Excluding the manufacturing credits, gross margin increased 4.4 percentage points to 28.5%.
“Momentum across data centers, communications, and aerospace and defense is generating strong sales growth and margin expansion, offsetting the delayed recovery of material handling demand,” President and Chief Executive Officer Shawn O’Connell stated.
Operating cash flow surged to $230.2 million from $1 million a year earlier, helped by stronger earnings and a U.S. federal tax refund.
Free cash flow reached $217.8 million, compared with an outflow of $32.1 million during the prior-year period. Chief Financial Officer Andrea Funk reported free cash flow conversion of 187%.
EnerSys ended the quarter with $530.7 million in cash and cash equivalents and $521.5 million in net debt.
Its net leverage ratio declined to 0.8 times earnings before interest, taxes, depreciation and amortization from 1.6 times a year earlier.
Capital expenditures decreased to $12.4 million from $33 million. The company expects approximately $70 million in capital spending for the full fiscal year.
EnerSys returned approximately $59.6 million to shareholders during the quarter, including $50 million spent repurchasing approximately 219,000 shares and $9.6 million in dividends.
The board increased the quarterly dividend by 10% to 28.75 cents per share, marking its fourth consecutive annual dividend increase.
The dividend is payable October 2 to shareholders of record on September 18.
For the second quarter, EnerSys forecast revenue of $955 million to $995 million and adjusted earnings of $3.15 to $3.25 per share.
The company expects federal advanced manufacturing production credits to reduce production costs by $42 million to $47 million during the quarter.
Excluding those credits, adjusted second-quarter earnings are projected at $1.95 to $2.05 per share.
“Our second quarter outlook reflects continued strength across Data Centers, Communications, and Aerospace and Defense, as well as early recovery in Transportation,” Funk stated.
Management expects earnings growth during the first half of fiscal 2027 to come primarily from improved margins, with stronger revenue growth later in the year as material handling demand recovers and other major markets continue expanding.
The company is also advancing next-generation products, developing a planned lithium cell manufacturing facility and expanding its services business.
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