EnerSys (ENS) Q2 2027 earnings review
EnerSys wins more orders, but its forklift battery sales shrink
EnerSys, which makes industrial batteries for data centers, forklifts and armed forces, earned more even though its sales stood still. Revenue landed just below the company's own range, and its unit selling batteries for forklifts and other vehicles shrank 8%. Orders climbed 21%, so the backlog of unfilled work reached $1.24 billion.
| Revenue | $949.9M −0.1% from a year ago; the company's range was $955–995M |
|---|---|
| Profit per share, excluding one-offs | $3.22 +22% from a year ago |
| New orders | $1,044M +21% from a year ago |
| Next-quarter sales outlook | New: $935–975M middle of the range: about 4% growth |
⚖️ Verdict: 🟢 Bullish
The story got better, because demand now runs ahead of what EnerSys ships. Defense customers placed much of that business, and the company's forecast has sales rising again next quarter. One caution: forklift batteries, which have lagged for several years, fell faster this time, so the outlook rests on a turnaround that has slipped before.
The question now is whether forklift demand is really turning. Finance chief Andrea Funk sees “early recovery”. The other reading is that lumpy transport and military projects built most of the new backlog. Next quarter's sales at the forklift unit will settle it.
🐂 Bull Case
Military Batteries Grew 21% at a Wider Margin
Precision Power Solutions is EnerSys's defense unit, which makes batteries that soldiers carry and power for munitions. Chief executive Shawn O'Connell said the unit “delivered more than 20% year-over-year sales growth, supported by strong demand for soldier power and munitions”.
The unit also kept more of each dollar, because it sold more units at better prices. Customers placed orders worth almost twice what it shipped. One European customer signed a $50 million soldier-power order that runs several years.
- Sales: $104 million, up 21% from a year ago
- Volume: up 13%; prices and product mix: up 8%
- Margin excluding one-offs: 21.9%, up 3.4 percentage points
- Orders against shipments: 1.96, after 0.73 last quarter
This matters because the defense unit earns more than twice the forklift unit's margin, so each extra dollar there lifts group profit faster. The standing worry is that defense buyers refill stockpiles, then pause. These orders argue against a pause, but one quarter in a lumpy business proves little.
What to watch: the defense unit's ratio of orders to shipments next quarter. A reading above one would show that new awards kept arriving after this quarter's large batch.
Data Center Sales Lifted the Network Unit's Margin
Network & Infrastructure Solutions sells batteries and power equipment for data centers and communications networks. Its sales rose 3% even though the same quarter last year was unusually strong, O'Connell said, “driven by double-digit growth in data centers”.
The unit's margin excluding one-offs reached 11.2%, up 2.9 percentage points from a year ago. EnerSys credited data center volume, a better mix led by power electronics and tight cost control. Orders trailed shipments this quarter, after a large first quarter for data center bookings.
What to watch: data center sales growth next quarter. Finance chief Andrea Funk expects continued strength there, and a second double-digit quarter would show the earlier order rush turning into shipments.
Lower Overhead Lifted Profit on Flat Sales
Finance chief Andrea Funk said cost discipline “supports our ability to expand margins while investing in the opportunities ahead”. EnerGize, the plan behind that claim, cut jobs and moved production from Mexico to US plants.
Her numbers hold up on overhead. Operating expenses, the cost of selling and running the business, fell 10% from a year ago. They took 15.6% of revenue, down 1.6 percentage points.
But gross margin excluding the 45X tax credit, a US payment for making batteries at home, improved only 0.3 percentage points. Most of the gain therefore came from overhead, not from cheaper production.
What to watch: overhead as a share of revenue next quarter. Funk expects margin pressure in that period, so overhead near this level would show the savings hold.
🐻 Bear Case
Forklift Battery Sales Fell Faster Than Last Quarter
Industrial Mobility Solutions sells batteries for forklifts and other industrial vehicles. EnerSys has pushed back the recovery of its forklift side, known as material handling, several times. Chief executive Shawn O'Connell described “continued pressure in material handling”.
- Unit sales: $397 million, down 7.8% from a year ago
- Last quarter: down 3.2%
- Volume: down 6%; prices and product mix: down 2%
- Margin excluding one-offs: 9.5%, down 0.6 percentage points
EnerSys said its shortfall against the sales range was “the result of foreign currency translation”. Its own slide, however, shows currency had no effect on the change from a year ago. Meanwhile this unit lost $34 million of sales, more than six times the gap to the bottom of the range.
Finance chief Andrea Funk sees “early recovery” and expects the unit to grow again next quarter. Orders did exceed shipments, but she said lower-margin transport sales are outpacing forklift batteries.
What to watch: the unit's sales change next quarter, which Funk expects to turn positive. Another decline would mean the recovery date has slipped again.
Tax Credit Still Makes Up 37% of Earnings
The 45X credit is a US payment for making battery parts at home, which EnerSys books as lower production cost. Moving work from Mexico to US plants lifted it; the defense unit gained $5 million.
- Credit: $44.4 million, up 12% from a year ago
- Share of profit per share excluding one-offs: $1.20 of $3.22, about 37%
- Gross margin: 29.9% with the credit, 25.2% without it
That growth also enlarges the risk. A change in US law could remove more than a third of earnings, because the credit arrives with no matching cost. Next quarter's profit range includes the credit but no longer shows it separately.
What to watch: whether EnerSys states the credit for next quarter on its call. A figure above $44 million would tie a larger share of earnings to the law.
Risks this quarter didn't answer
Several standing concerns got little or no new evidence in the results or the slides, so each still waits for a later disclosure.
- Uneven data center and communications orders: the network unit's orders came to 0.90 times its shipments, down from 1.15; next quarter's ratio will show whether that was timing.
- Lithium replacing its older lead-acid batteries: DataSafe Noir, a lithium system for data centers, won a first order but reports no sales; its first revenue will show demand.
- Greenville lithium cell plant: EnerSys said a federal environmental review decides the timing; a construction start date would settle it.
- $300 million of notes due December 2027: EnerSys has not said how it will refinance them; a new debt deal would answer it.
👓 Other Themes
EnerSys Agreed to Buy Ultralife for Defense Batteries
EnerSys agreed to buy Ultralife, which makes batteries for military communications gear, for about $320 million including debt. The company said the deal aims “to expand differentiated battery technologies and accelerate growth in defense market”. It plans to pay with cash on hand and close by March 2027. EnerSys expects $15–20 million of yearly cost savings within about 18 months.
First Orders Arrived for Two Lithium Products
Chief executive Shawn O'Connell said EnerSys won its first order for DataSafe Noir, its lithium battery system for data centers. He said it also “began generating sales from our second-generation lithium offering for material handling”, meaning forklifts. In August, O'Connell had expected those sales only in the second half. Neither product reports revenue yet, so nobody can measure its effect on growth.
Tariff Refunds Turned Into a Small Charge
IEEPA tariffs, emergency US import duties, lost their legal basis in February, so EnerSys is reclaiming what it paid. Refund adjustments cost $2 million this quarter, after a $31 million gain in the first. EnerSys said its remaining tariff costs stay fully offset by supply-chain and pricing moves. Freight and inflation costs from geopolitical conflict also rose, the company said. The outlook excludes further refunds.
💲 Other KPIs
The backlog of orders not yet shipped jumped 23% from last quarter and 36% from a year ago. It had trailed year-earlier levels in each of the four quarters before. Defense awards and transport customers of the forklift unit drove the rise, EnerSys said.
Cash left after spending on plants and equipment fell 34% from a year ago, because the year-ago quarter included a US federal tax refund, EnerSys said. Over the half year it more than doubled, to $348 million. Higher earnings, smaller plant spending and tighter working capital drove that gain, the company said.
Borrowings net of cash fell 34% from a year ago. That debt now equals 0.8 times a year of operating profit before depreciation, under the 2–3 times range EnerSys targets. It rose from last quarter, because the battery maker spent $130 million buying back its own shares.
Cash tied up in unpaid customer bills and inventory, minus supplier bills, dropped to 22.0% of yearly sales from 26.5% a year ago. The group credited mostly a larger sale of customer invoices under a receivables agreement. Inventory has grown since March, which it called strategic building.
🔮 Guidance
New. The plan has sales rising about 4% from a year ago, after a flat second quarter. Finance chief Andrea Funk expects material handling to bring the forklift unit back to growth. The range uses current tariff rates and leaves out Ultralife and any refunds. Sales fell short of the range this quarter, the third such miss in eight quarters.
New. The forecast has profit per share up about 6% from a year ago, and below this quarter's level. Funk pointed to lower-margin transport sales and to tough comparisons in the defense and network units. The range includes the 45X tax credit, but unlike last quarter it does not show the credit separately.
Unchanged. The plan still calls for about $70 million of spending on plants and equipment this year. By our math, that leaves about $45 million for the second half. That is almost double the first half's $25 million, and well above the same period last year. The Greenville cell plant falls outside it, because building starts in fiscal 2028.
Unchanged. EnerSys still plans a tax rate of 21.5% to 23.5% on profit excluding one-offs, before counting the 45X manufacturing credit. The range has stayed the same since the company first set it in May.
❓ Key Questions
How much of next quarter's profit comes from 45X?
The outlook includes the US manufacturing credit but, unlike last quarter, gives no separate range for it. The credit supplied about 37% of profit per share excluding one-offs this quarter, so its size decides what the core business earns.
How much did forklift battery sales fall on their own?
The forklift unit mixes material handling with transport, which grew. Without the split, readers cannot judge whether the recovery Funk describes has started, or whether transport alone props up the unit.
Which currency moves pushed sales below the range?
EnerSys blamed currency for sales landing below its range, yet its slide shows no currency effect from a year ago. A figure for the currency impact against the range's assumptions would settle it.
How large are data center sales in dollars?
EnerSys reports data center growth only as a rate. A dollar figure, and the split between lead-acid batteries, power electronics and services, would show how much of the network unit depends on one market.
Will EnerSys give a full-year sales outlook again?
The company has offered only next-quarter ranges since May 2025. A full-year range would show whether the larger backlog turns into growth for the whole year, and what Ultralife adds after closing.