EnerSys ENS, on Dec 5, proposed to offer $300 million worth of senior notes, set to mature in 2027. It is worth noting here that the offering will be private in nature, and will depend on satisfactory market and customary conditions.
Also, the company communicated that the senior notes (proposed to be offered) will be EnerSys’ unsecured obligations. However, these notes will be guaranteed by those subsidiaries (existing and future) of EnerSys which act as guarantors to the company’s existing 5% senior notes due 2023 and senior secured credit facilities.
Funds raised from notes offering will be used by EnerSys for repayment of borrowings under the existing revolving credit facility.
We believe these offerings of senior notes will increase EnerSys’ debts and in turn, might inflate its financial obligations and dampen profitability. However, repayment of debts using the offering proceeds will be a relief.
EnerSys’ Debt Profile
It is worth mentioning here that the company's long-term debt at the end of second-quarter fiscal 2020 (ended Sep 29, 2019) stood at $1,117.8 million. This balance reflects 86.4% increase from the year-ago figure.
Also, the company’s interest expenses in the quarter totaled $10.1 million, suggesting a rise of 57.4% from the year-ago quarter.
Zacks Rank, Estimates and Price Performance of EnerSys
The company, with approximately $3-billion market capitalization, currently carries a Zacks Rank #3 (Hold). It is poised to benefit from acquired assets and solid products portfolio. However, rising costs and unfavorable movements in foreign currencies are concerns. Also, a highly leveraged balance sheet can be detrimental.
In the past 60 days, earnings estimates for EnerSys have moved south. The Zacks Consensus Estimate for its earnings is pegged at $5.07 for fiscal 2020 (ending March 2020) and $6.04 for fiscal 2021 (ending March 2021), suggesting a decline of 2.1% and 0.5% from the respective 60-day-ago figures.
Enersys Price and Consensus
Enersys price-consensus-chart | Enersys Quote
In the past three months, the company’s share price has increased 16.7% compared with the industry’s growth of 10.9%.
Stocks That Warrant a Look
Some better-ranked stocks in the Zacks Industrial Products sector are Tennant Company TNC, DXP Enterprises, Inc. DXPE and Standex International Corporation SXI. While Tennant currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Standex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for Tennant and DXP Enterprises have improved for the current year, while the same has been unchanged for Standex. Further, positive earnings surprise for the last reported quarter was 40% for Tennant, 16.39% for DXP Enterprises and 2.11% for Standex.
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