READING, PA — EnerSys (NYSE: ENS), a global leader in stored energy solutions for industrial applications, recently revised its fiscal third quarter 2024 outlook. This update follows the December 14, 2023, issuance of proposed regulations by the U.S. Department of the Treasury concerning Section 45X of the Internal Revenue Code, known as the Advanced Manufacturing Production Credit.
These proposed regulations clarify how to calculate the capacities of batteries that qualify for tax credits. EnerSys believes that more of its product sales will qualify for these tax credits than initially anticipated due to these clarifications.
Consequently, the company now expects its annual tax credits, which are recorded as a reduction to cost of goods sold and not subject to taxation, to be approximately $120 million to $160 million. This forecast represents an increase of about $35 million to $45 million compared to the previously stated annual range of roughly $80 million to $120 million. EnerSys anticipates continuing to receive credits for its qualifying U.S. production volumes through December 31, 2032.
Based on the Treasury’s proposed regulations, EnerSys now predicts its third quarter fiscal 2024 adjusted diluted EPS to be between $2.50 and $2.60. This figure includes retroactive impacts for the incremental IRC 45X tax benefits from the fourth quarter of fiscal 2023 through the third quarter of fiscal 2024. It also accounts for sustained capex pauses from telecom and broadband customers. The new estimate is higher than the previously communicated range of $1.80 to $1.90.
“EnerSys’s eligibility for Section 45X credits underscores the crucial role our products play in driving the global energy transition,” said EnerSys President & CEO David M. Shaffer. “We remain highly focused on executing our strategic initiatives to achieve our long-term goals. The proposed regulations further support EnerSys’s domestic investments in technology and operations, enabling us to provide efficient, innovative solutions for our customers.”
EnerSys continues to evaluate the proposed regulations with its advisors and will provide more details during its regularly scheduled third quarter fiscal 2024 earnings results conference call in February 2024.
Section 45X of the Internal Revenue Code was created under Section 13502 of the Inflation Reduction Act of 2022 and signed into law on August 16, 2022. It provides Advanced Manufacturing Production Credits for battery cells and modules produced in the U.S. with an energy density of at least 100 watt-hours per liter. These credits are determined based on sales of qualifying products produced in the U.S. from January 1, 2023, through December 31, 2032.
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