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EnerSys Highlights AI-Driven Data Center and Defense 'Super Cycles' at Oppenheimer Conference

Overview of Enersys and Its Strategic Focus

Enersys (NYSE: ENS) is a global leader in stored energy solutions, offering a wide range of products and services tailored for critical applications. During a discussion at Oppenheimer's 21st Annual Industrial Growth Conference, the company's President and CEO, Shawn O'Connell, highlighted Enersys' growth priorities across several key sectors, including data centers, defense, warehousing, and energy storage. O'Connell emphasized that the company is positioned to benefit from two major "super cycles," which are expected to drive long-term demand.

O'Connell described Enersys as a provider of stored energy solutions that span batteries, power electronics, software systems, and services. He noted that the company is well-placed to capitalize on trends related to artificial intelligence infrastructure, communications networks, and aerospace and defense electrification. These areas represent significant opportunities for Enersys, given the increasing reliance on reliable and efficient energy solutions.

Key Business Segments and Revenue Distribution

According to O'Connell, Enersys' business is divided into three main segments:

  • Network Infrastructure: This includes telecommunications, utilities, and data centers, accounting for approximately 42% of sales.
  • Warehousing and Logistics: This segment represents about 41% of the company's revenue, with Enersys managing electric forklift batteries in more than one out of two U.S. warehouses.
  • Specialty Applications: This category covers aerospace and defense, making up roughly 17% of sales.

O'Connell emphasized that the company's network infrastructure business has a "commanding position" in data centers, communications, utility substations, and switchgear control applications. Additionally, Enersys has a strong presence in the warehousing and logistics sector, where it helps warehouse operators manage energy constraints and reduce costs through battery energy storage systems.

Addressing Labor Scarcity and Operational Challenges

One of the challenges facing warehouse operators is labor scarcity, which O'Connell said Enersys can address through its software solutions that reduce manual intervention. The company also relies on its own service workforce rather than contractors, ensuring consistent support for its customers.

The EnerGize Framework and Resource Allocation

Since becoming CEO, O'Connell has implemented the "EnerGize" framework, which reorganizes Enersys under specific centers of excellence. These include:

  • Asset-light contract manufacturing and electronics supply chain
  • Lead-acid operations
  • Lithium technology

The lead-acid center of excellence focuses on capturing cost synergies by integrating supply chain, engineering, process control, and operational management. O'Connell also mentioned that Enersys has been producing nine lithium chemistries for decades and plans to expand its use of this technology.

Investor Day and Growth Model Clarification

Enersys is set to hold an Investor Day to simplify its story and explain how it intends to grow faster than traditional industrial growth rates. O'Connell emphasized that the company is not targeting broad commodity battery markets but instead focusing on niche applications where it has existing customer relationships and expertise. For example, Enersys has a deep understanding of forklift manufacturers, battery operations, and warehouse energy needs, which gives it a competitive edge over larger competitors.

The company also aims to outline a "credible and replicable model" for earnings per share growth, using disciplined operating expense leverage, new product introductions, industry tailwinds, mergers and acquisitions, and capital allocation.

Manufacturing Footprint and Lithium Plant Plans

Enersys is consolidating parts of its manufacturing footprint while expanding in areas identified as future growth markets. O'Connell mentioned that the company has invested in Missouri to increase thin plate pure lead (TPPL) capacity, which offers better density than older lead-calcium battery formats. He also discussed plans for a lithium plant in Greenville, emphasizing that the project remains a priority, though the timeline has been affected by government processes.

The focus of the lithium plant is likely to shift toward defense-related applications such as drones and soldier power platforms rather than electric vehicle cell formats. This shift could help reduce exposure to commercial fluctuations in the EV battery supply chain and leverage partnerships with the defense apparatus to fund equipment and expansion tied to a munitions backlog.

Tariffs and Data Center UPS Opportunity

Funk provided details on tariff exposure, noting that about 22% of Enersys' U.S. sourcing is subject to tariffs. She estimated annualized exposure at around $70 million, with $50 million to $60 million directly exposed and $10 million to $15 million indirectly exposed. Supply chain mitigations have addressed about $25 million to $30 million, leaving around $40 million of net tariff exposure.

In data centers, O'Connell said Enersys continues to see growth in lead-acid products, including greenfield builds. Lead-acid batteries retain advantages in certain scenarios where local authorities, building architecture, fire suppression limitations, customer risk tolerance, or cost make lithium less attractive. TPPL batteries can replace traditional lead-acid batteries in existing sites without major modifications.

O'Connell also mentioned that Enersys' data center UPS revenue is approaching $450 million, all currently based on lead-acid. However, he noted that lithium presents a large opportunity as more greenfield data centers move toward lithium-based stationary UPS systems. Enersys currently has zero lithium market share in this area and must prove its system.

About Enersys

Enersys, headquartered in Reading, Pennsylvania, specializes in manufacturing and distributing industrial batteries, battery chargers, power equipment, and related accessories. The company serves a diverse range of end markets, including telecommunications, data centers, medical, aerospace, defense, electric vehicle motive power, and utility outcomes. Its products are engineered to deliver critical reserve power and motive power applications across key infrastructure and industrial sectors.

The company's product portfolio includes lead-acid batteries, lithium-ion energy storage systems, chargers, inverters, power management software, and a broad array of battery accessories.