Enersys (NYSE: ENS) has just announced significant incremental benefits associated with the advanced manufacturing production credit under Section 45X of the Internal Revenue Code (IRC). The company estimates these benefits to be approximately $3 million to $4 million per quarter, resulting in a one-time catch-up adjustment during its fiscal third quarter 2025 of $30 million to $35 million to reflect benefits retroactive to its fiscal fourth quarter of 2023.
This adjustment has led to an increase in Enersys' adjusted diluted earnings per share (EPS) guidance for both the fiscal third quarter 2025 and the full year fiscal 2025. Previously, the company had provided third quarter adjusted diluted EPS guidance in the range of $2.20 to $2.30 and full year adjusted diluted EPS guidance between $8.75 and $9.05. With the incremental Section 45X benefits, Enersys now anticipates third quarter fiscal 2025 adjusted diluted EPS of $3.00 to $3.10 and full year fiscal 2025 adjusted diluted EPS of $9.65 to $9.95.
Additionally, based on the final regulations, the company expects to record annual tax credits as a reduction to cost of goods sold and not subject to taxation in the range of approximately $135 million to $175 million. This compares to the previously communicated annual range of approximately $120 million to $160 million.
Enersys anticipates receiving its first tax refund under the Section 45X credits following the finalization of its fiscal year 2024 tax filings, which is expected to positively impact cash flow by the end of fiscal year 2025.
These changes come as a result of the final regulations for Section 45X, which provides advanced manufacturing production credits for battery cells and battery modules produced in the United States with specific energy density requirements. Enersys expects to continue receiving tax credits associated with its qualifying U.S. production volumes through December 31, 2032.
It's worth noting that the company goes to market through four lines of business: energy systems, motive power, specialty, and new ventures. Enersys also provides aftermarket and customer support services to its customers in over 100 countries through its sales and manufacturing locations around the world. Following these announcements, the company's shares moved 6.7%, and are now trading at a price of $97.62. For the full picture, make sure to review EnerSys's 8-K report.
