Skip to content
    ENS
    Earnings call· Mar 2026(Q4 FY26)

    EnerSys Q4 FY26 earnings call ENS

    May 21, 2026 Source

    Executive summary

    EnerSys Q4 FY26 — Record EPS and Strategic Framework Benefits

    EnerSys delivered record Q4 and full-year adjusted EPS, driven by strategic framework benefits, strong free cash flow, and operational discipline, despite softer volumes in motive power and transportation. The company is leveraging its diversified business and enhanced operating model to navigate dynamic macro conditions, with a focus on high-value growth initiatives and disciplined capital allocation. New lithium solutions are advancing to customer commissioning, and the Greenville plant strategy is being refined for aerospace and defense.

    Highlights

    5

    • Delivered highest quarterly adjusted EPS of $3.19, a 7% increase over prior year.

    • Achieved full year record sales of $3.8 billion, up 4% year-over-year.

    • Generated strong free cash flow of $131 million in Q4, with 170% conversion (459% excluding 45X benefits).

    • Posted highest book-to-bill ratio in nearly 4 years at 1.1, with all lines of business Q4 orders outpacing revenue.

    • Reduced net debt by approximately $100 million since the end of FY25, bringing leverage ratio to 1.1x EBITDA.

    Concerns

    5

    • Q4 adjusted gross margin decreased by 170 basis points (190 bps without 45X) year-over-year due to $20 million higher freight, tariff, and inflationary costs.

    • Total tariff exposure remains stable at approximately 22% of U.S. sourcing, with an annualized estimate of $70 million before mitigations.

    • Experienced direct and indirect impacts from the Middle East conflict, including elevated freight and inflationary pressures in Q4.

    • Navigated softer but improving forklift and transportation markets, with Motive Power revenue down 6% year-over-year and Specialty transportation sales down high single digits.

    • Q4 effective tax rate was 22% on an as-reported basis, higher than prior periods due to one-time restructuring and tax law changes.

    Guidance & targets

    8
    CategoryTargetConfidence
    Net Sales
    $915 million to $955 million
    high materiality
    High
    Adjusted Diluted EPS (including 45X benefits)
    $2.80 to $2.90 per share
    high materiality
    High
    Adjusted Diluted EPS (excluding 45X benefits)
    $1.61 to $1.71 per share
    high materiality
    High
    Full Year Tax Rate (as adjusted, before 45X)
    21.5% to 23.5%
    medium materiality
    Medium
    Adjusted Operating Earnings Growth (excluding 45X benefits)
    outpace revenue growth
    medium materiality
    Medium
    Volume Recovery (Motive Power & Transportation)
    return to growth expected
    medium materiality
    Medium
    Incremental 45X Benefits (Tijuana closure)
    approximately $20 million
    medium materiality
    High
    Savings (Monterrey closure)
    approximately $19 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Energy Systems
    Revenue driven by strong price/mix, positive FX impact, and volume growth in Power Electronics. Operating earnings bolstered by favorable price mix and OpEx savings. Record sales of flagship XM products are expected to continue. The project nature of this business can cause fluctuations quarter-to-quarter. Data center revenue was flat YoY in Q4 due to a particularly strong prior year comp.
    Adjusted operating earnings: $42 million (up 23% YoY)Adjusted operating margin: 10% (up 130 bps YoY)Volume growth: Power ElectronicsRecord sales: flagship XM productsData center revenue: flat YoY in Q4 (high single digits for full year)Orders: up 36% YoY
    		$426 million7%—$42 million
    Motive Power
    Revenue decreased due to lower volumes from ongoing market softness, partially offset by FX tailwinds and favorable base mix. Operating earnings impacted by lower volume leverage and higher freight and tariff costs, despite OpEx savings and price/mix improvements. Long-term growth is well-positioned due to electrification, automation, and strong demand for maintenance-free and charger solutions.
    Adjusted operating earnings: $53 million (down 21% YoY)Adjusted operating margin: 14.2% (down 280 bps YoY)Maintenance free product sales: 30.4% of revenue mix (vs 29.3% in Q4 FY25)Orders: up 19% sequentially
    		$370 million-6%—$53 million
    Specialty
    Revenue increased driven by favorable price/mix, particularly in Aerospace & Defense (A&D), early contributions from the Rebel acquisition, and FX tailwinds, partially offset by lower transportation volumes. Operating earnings benefited from continued strong performance in A&D. Transportation sales were down high single digits, but orders indicate an early, bumpy recovery. Confidence in reaching sustained mid- to high teens margin performance, though progression may not be linear.
    Adjusted operating earnings: $18 million (up 20% YoY)Adjusted operating margin: 0.4% (up 90 bps YoY)Transportation orders: up over 30% YoY
    		$192 million8%—$18 million

    Operational metrics

    43
    Adjusted Gross Profit
    $292 milliondown $12 million (4%) YoY
    Q4 FY26

    Down versus a particularly strong prior year period as higher freight, tariff and inflationary costs weighed on performance.

    Adjusted Gross Margin
    29.5%down 170 bps YoY
    Q4 FY26

    Versus a very strong prior year comp. In line with recent historical averages despite margin dilution from pass-through of tariffs and higher freight costs.

    Adjusted Operating Earnings
    $154 millionup 1% YoY
    Q4 FY26

    As a result of cost reduction initiatives.

    Adjusted Operating Margin
    15.6%
    Q4 FY26

    Calculated from adjusted operating earnings.

    Adjusted Operating Earnings (excluding 45X)
    roughly flatYoY
    Q4 FY26

    Excluding 45X benefits.

    Adjusted Operating Margin (excluding 45X)
    10.9%
    Q4 FY26

    Excluding 45X benefits.

    Adjusted EBITDA
    $173 millionup $6 million (3%) YoY
    Q4 FY26

    Increase versus prior year.

    Adjusted EBITDA Margin
    up 40 bpsYoY
    Q4 FY26

    Increase versus prior year.

    Adjusted EBITDA (excluding 45X)
    $126 millionup $3 million (3%) YoY
    Q4 FY26

    Excluding 45X benefits.

    Adjusted EBITDA Margin (excluding 45X)
    12.8%up 20 bps YoY
    Q4 FY26

    Excluding 45X benefits.

    Adjusted Diluted EPS
    $3.19up 7% YoY
    Q4 FY26

    Record high.

    Adjusted Diluted EPS (excluding 45X)
    $1.96up 5% YoY
    Q4 FY26

    Record high.

    Effective Tax Rate (as-reported)
    22%
    Q4 FY26

    Higher than prior periods due to one-time impact from restructuring and tax law changes.

    Effective Tax Rate (as adjusted, before 45X)
    20.4%vs 18.9% in Q4 FY25 and 22.4% in Q3 FY26
    Q4 FY26

    Can vary quarter-to-quarter on geographical mix of earnings.

    Full Year Net Sales
    $3.8 billionup 4% YoY
    FY26

    All-time high.

    Full Year Adjusted Operating Earnings
    $540 million
    FY26

    Includes $159 million benefit from IRC 45X tax credit.

    Full Year Adjusted Operating Profit (excluding 45X)
    $382 million
    FY26

    Record high.

    Full Year Adjusted Operating Margin (excluding 45X)
    10.2%
    FY26

    Highest full year adjusted operating margin.

    Full Year Adjusted Diluted EPS
    $10.56up 4% YoY
    FY26

    Increase versus prior year.

    Full Year Adjusted Diluted EPS (excluding 45X)
    $6.41up $0.82 YoY
    FY26

    Record high.

    Free Cash Flow Conversion
    170%
    Q4 FY26

    Elevated in part by accrued expenses recognized in GAAP earnings related to cost optimization initiatives.

    Free Cash Flow Conversion (excluding 45X)
    459%
    Q4 FY26

    Excluding the benefit of 45X to earnings and cash.

    Full Year Free Cash Flow Conversion
    159%
    FY26

    Elevated in part by accrued expenses recognized in GAAP earnings related to cost optimization initiatives.

    Full Year Free Cash Flow Conversion (excluding 45X)
    236%
    FY26

    Excluding 45X benefits.

    Primary Operating Capital (POC)
    $877 millionvs $932 million prior year
    Q4 FY26

    Decreased versus prior year on improved receivable collections and inventory efficiency.

    POC as % of annualized sales
    improved 170 bpsYoY
    Q4 FY26

    After absorbing the impact of tariffs and tariff pass-through in both inventory and accounts receivable balances.

    Cash and Cash Equivalents
    $440 million
    March 31, 2026

    Cash on hand.

    Net Debt
    $684 milliondecrease of ~$100 million since end of FY25
    March 31, 2026

    Decrease since the end of fiscal '25.

    Leverage Ratio
    1.1x
    Q4 FY26

    Remains well below target range of 2 to 3x.

    Capital Expenditures
    $13 million
    Q4 FY26

    Capital expenditures in the quarter.

    Capital Expenditures
    $80 million
    FY26

    Full fiscal year spend.

    Share Buybacks
    $69 million
    Q4 FY26

    Purchased 410,000 shares for $69 million at an average price of approximately $171 per share.

    Dividends Paid
    $9.6 million
    Q4 FY26

    Dividends paid in the quarter.

    Remaining Buyback Authorization
    $876 million
    May 20, 2026

    As of May 20.

    Total Capital Returned to Shareholders
    $409 million
    FY26

    Total returned during the year through buybacks and dividends.

    Tariff Exposure (annualized estimate)
    $70 million
    Annualized

    Before mitigations, total tariff exposure remains stable at around 22% of U.S. sourcing.

    Tariff Exposure (% of US sourcing)
    22%
    Q4 FY26

    Total tariff exposure remains stable at around 22% of U.S. sourcing.

    Freight, Tariff, Inflationary Costs Impact
    $20 millionYoY
    Q4 FY26

    Up year-on-year, net of having produced more products in region for region.

    Net Sales Growth
    1%YoY
    Q4 FY26

    Driven by favorable price mix and foreign currency translation, partially offset by organic volume decrease.

    Total Company Volumes
    up 7%QoQ
    Q4 FY26

    All lines of businesses saw sequential volume improvement.

    Organic Volume
    down 6%YoY
    Q4 FY26

    Partially offset by price/mix and FX benefits.

    45X Benefits
    $47 million
    Q4 FY26

    Benefit to cost of sales.

    45X Benefits
    $159 million
    FY26

    Benefit from IRC 45X tax credit.

    Industry KPIs

    5
    MetricValueDetails
    Book to bill ratio1.1
    Orders bookings growth1%%
    M a acquisition contributionEarly contributions
    Backlog by segment end marketIncreasing
    Data center exposure pipelineHigh teens%

    Orderbook & backlog

    2
    Book-to-bill ratio1.1Q4 FY26

    Highest in nearly 4 years, with all lines of business Q4 orders outpacing revenue.

    Specialty A&D book-to-bill1.22Q4 FY26

    Orders are really strong, particularly in munitions and space.

    Product announcements

    2
    ProductTypeDetails
    Lithium data center solutionmilestone
    Battery energy storage solutions for warehouse operatorsmilestone

    Deals & partnerships

    1
    RebelAcquisition of hybridized power systems

    Early contributions from the Rebel acquisition to Specialty revenue. The Rebel Hyper system is central to the conversation around electrifying the battlefield and charging rechargeable drones at the forward edge of battle.

    Capital programs

    4
    Tijuana, Mexico facility closureannounced

    Benefit: approximately $20 million incremental 45X benefits

    Closure of Tijuana, Mexico facility and shift to production to Springfield, Missouri plant. Expected to generate approximately $20 million of incremental 45X benefits beginning in fiscal '28. Further optimizes manufacturing footprint, maximizes 45X benefits, supports transition to higher-margin solutions, and mitigates tariff risks.

    Monterrey, Mexico plant closuresubstantially completed

    Benefit: approximately $19 million savings

    Substantially completed previously announced plant closure. Expected to yield approximately $19 million of savings in fiscal '27, with early realization of related incremental 45X benefits already seen this quarter. Further optimizes manufacturing footprint, maximizes 45X benefits, supports transition to higher-margin solutions, and mitigates tariff risks.

    Greenville, SC lithium cell factoryin final stages of grant process

    Benefit: focused manufacturing footprint aligned with competitive advantages and customer value proposition

    Rescoped strategy with an increased focus on applications for customers that value secure, domestic supply chains, particularly within aerospace and defense markets. Leverages more established and commercial improvement cell technology, significantly derisking the program and enabling a faster path to production. In final stages of Department of Energy grant process.

    Capital Expenditures
    Period spend: $70 million

    Benefit: selectively focus on the highest return, highest impact investments

    Expectation for fiscal year '27, as heavier investments in TPPL capacity flexibility have been completed.

    Risks & headwinds

    5
    Higher freight, tariff, and inflationary costsQ4 FY26 and ongoing

    $20 million YoY impact in Q4 FY26

    Mitigation: Diversified supply chains, increased sourcing flexibility, prioritized manufacturing in region for a region, active management of costs, price pass-through.

    Geopolitical disruption (Middle East conflict)Q4 FY26 and ongoing as long as conflict persists

    Elevated freight and inflationary pressures, potential temporary pressure on metal costs

    Mitigation: Actively manage what can be controlled, mitigate direct and indirect costs, preserve flexibility to respond as conditions evolve.

    Heightened economic uncertaintyQ4 FY26 and ongoing

    Impact on customer buying patterns, experienced a bit in Q4

    Mitigation: Focus on operational rigor, manufacturing and supply chain efficiencies, and targeted high-value new product launch initiatives.

    Softer forklift and transportation marketsQ4 FY26, improving through FY27

    Motive Power revenue down 6% YoY; Specialty transportation sales down high single digits

    Mitigation: Anticipating orders to trend positively, gradually increasing through FY27 with a return to growth expected as the year progresses, driven by pent-up demand.

    One-time tax impactQ4 FY26

    Q4 FY26 effective tax rate of 22% (as-reported)

    Mitigation: Due to restructuring and tax law changes, not an ongoing operational issue.

    What to watch in Q1 FY27

    5

    Motive Power and Transportation Volume Recovery

    As FY27 progresses
    CurrentVolumes down YoY, but orders up sequentially (Motive Power up 19% QoQ, Specialty transportation up >30% YoY orders)
    TargetReturn to growth in both markets

    Why it matters

    Indicates broader economic health and demand for core industrial products, crucial for overall revenue growth.

    We're cautiously anticipating orders to continue to trend positively gradually increasing through our fiscal '27 with a return to growth expected in both markets as the year progresses, led by motive power.

    Q&A highlights

    6

    Why were Energy Systems volumes flat despite strong XM shipments and data center demand, given tough prior-year comps? How to think about growth profile in FY27?

    Q4 FY25 had pull-in volume due to tariffs, making Q4 FY26 a tough comp. Data center was flat YoY in Q4 but high single digits for the full year. Energy Systems is project-based, leading to quarterly fluctuations. The company is proud of setting records despite Motive Power being in a recessionary position.

    “I think the thing that's important to keep in mind is Energy Systems is it's very much a project business. So while we look at our growth and there are a lot of opportunities to continue to grow, it's not always going to be linear quarter-to-quarter.”

    asked by Noah Kaye · answered by Andrea Funk

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Framework & Optimization

    EnerSys implemented its 'Energized Strategic Framework' in FY26, yielding meaningful benefits. Core optimization includes the closure of Tijuana, Mexico facility, expected to generate $20 million in incremental 45X benefits from FY28, and the substantial completion of Monterrey, Mexico plant closure, projected to save $19 million in FY27. The company is also invigorating its operating model, with Centers of Excellence delivering early working capital improvements and contributing to strong free cash flow.

    02

    Lithium Strategy & Greenville Plant

    The strategy for the Greenville, SC lithium cell factory has been rescoped to focus on aerospace and defense markets, emphasizing secure, domestic supply chains for applications like drones and soldier power. This updated approach leverages more established cell technology, significantly derisking the program and enabling a faster path to production. EnerSys is in the final stages of the Department of Energy grant process for this facility.

    03

    Market Dynamics & Demand Trends

    Despite a dynamic macro environment, EnerSys is observing strong underlying momentum in data centers, communications, and defense applications. Motive Power and Transportation markets, while softer, are showing improving trends, with Q4 orders outpacing revenue across all lines of business, resulting in a 1.1 book-to-bill ratio, the highest in nearly four years. The company anticipates a return to growth in these markets as FY27 progresses.

    04

    Geopolitical & Tariff Management

    EnerSys actively manages its tariff exposure, which remains stable at approximately 22% of U.S. sourcing, with an annualized estimate of $70 million before mitigations. The company has filed for reimbursement on all EPA tariffs. Direct and indirect impacts from the Middle East conflict, such as elevated freight and inflationary pressures, emerged in Q4, but management is confident in its ability to mitigate these higher costs.

    05

    New Product Development & Commercialization

    New product developments, including lithium data center solutions and battery energy storage solutions for warehouse operators, have advanced to customer commissioning this quarter. While these products are currently being deployed, meaningful revenue lift is not expected until FY28, as the company works through OEM handoffs and hyperscaler validation processes. This shift is anticipated to drive earnings improvement increasingly from top-line growth.

    06

    Capital Allocation & Financial Strength

    EnerSys maintains a strong financial position with $440 million in cash and cash equivalents and net debt of $684 million, resulting in a leverage ratio of 1.1x EBITDA, well below its target range. The company returned $409 million to shareholders in FY26 through $69 million in Q4 share buybacks (410,000 shares at ~$171/share) and $9.6 million in Q4 dividends, demonstrating a disciplined capital allocation strategy.

    AI-generated summary of the company’s earnings call. Not investment advice.