EnerSys (ENS) reported a better-than-expected finish to fiscal 2024 (ended March 31) on May 22. Though Q4 net sales fell 8% year-over-year to $910.7 million due to the expected persistence of spending pauses by telecom and broadband customers, this still came in $17.1 million above the consensus view thanks to continued positive demand momentum in most of its other end markets. With the maker of industrial batteries also enjoying a reduction in freight and commodity costs and benefiting from $36 million in tax credits under the Inflation Protection Act of 2022, its adjusted gross margin expanded to 28.0% from just 24.9% the year before. Adjusted earnings rose 14% to $2.08 per share, which was 7 cents better than expected and also reflected lower interest expense resulting from debt reduction.

This solid operating performance generated $109.4 million of free cash flow during the quarter. While slightly lower than the $112.8 million produced in Q4 of fiscal 2023, it still allowed ENS to reduce its net debt load and leverage ratio (net debt/credit adjusted Ebitda) by $75.8 million and 0.1 sequentially to $511.1 million and 1.0 even as it also spent a combined $22.4 million on dividends and buying back shares.

ENS’s outlook didn’t disappoint either, with the midpoints of the sales and adjusted earnings ranges it expects in Q1 of fiscal 2025 indicating a lesser top-line decline of 3% compared to the 4% projected by the Street, and a bigger bottom-line gain of 5% versus expectations for 2%. Better yet, the full-year guidance for sales of $3.675 billion to $3.825 billion and adjusted earnings in the $8.55 to $8.95 per share range is substantially higher than the consensus of $3.611 billion and $8.31, implying a return to sales growth of 6% along with a 3% rise in earnings over the final three quarters of the year.

That outlook doesn’t even include the contribution it expects from its pending acquisition of Bren-Tronics, which ENS agreed to buy for $208 million on May 2. Bren-Tronics is a U.S. manufacturer of portable power products that will expand ENS’s presence in defense applications, broaden its offerings and strengthen its product development capabilities. With Bren-Tronics expected to add approximately $100 million of annual revenue and $24 million in adjusted Ebitda, it will be immediately accretive to the company’s results upon completion of the deal, which is expected imminently.

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When considering that ENS, as a critical supplier of energy storage products and systems, is in excellent strategic position to capitalize on the rapid growth in demand for reliable power driven by global megatrends such as the proliferation of data centers, it’s not hard to see why growth should accelerate even further beyond the current fiscal year. As this continues to play out, I believe the stock’s recent strength—which has it up over 13% since we recommended it through our Forbes Investor newsletter on April 12—can persist.

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