Westport Innovations Is a Screaming Buy

For Westport Innovations (WPRT) things are changing as its shares have gained nearly 45% this year so far with the increase in the crude oil and natural gas prices. In fact, in a span of last one month, the WTI crude oil price has increased 13%, while the Brent crude oil has risen approximately 9%. As a result of these increases in the crude oil prices, the on-highway diesel fuel prices in the United States have climbed about 6% to the current level of $2.121 per gallon from $1.998 per gallon at the end of February 2016.

This increase in the diesel fuel prices with the increase in the crude oil prices provide an indication that conversion of diesel vehicles to natural gas will remain intact in the long-run.
In contrast, the natural gas fuel price for NGVs is around $1.50 to $2 less per gasoline gallon equivalent.

Let us look at the growth potential for Natural gas vehicles and find out what Westport is doing in order to tap this growth.

Well positioned for growth

Despite continued turbulence in global energy markets, Westport has well positioned for 2016 and beyond with lucrative investments in technologies, products and an expected merger with Fuel Systems that should provide a significant opportunity to achieve scale and synergies in our OEM component business. For instance, its investment in technologies such as HPDI 2.0 will not only enhance performance, increase reliability and durability, but also decreases costs for natural gas vehicles significantly.

In accordance with this HPDI 2.0 program, Westport has recently reset its product investment programs with its global original equipment manufacturer partners and concluded commercial terms for the Westport™ HPDI 2.0 launch with its lead customers. The company expects its first HPDI truck to hit the road before the year-end for further field trials and anticipates its first production in 2017.

Meanwhile, its investments in the spark ignited system will allow the NGVs engine to improve their power and torque over the base diesel engine by 10% and provide break thermal efficiency of up to 40%. In addition, this system will facilitate up to 5% weight reduction compared to the base diesel engine. These investments should allow the company to tap this growing NGVs market more effectively.

What’s more, the company is looking forward to the launch of two major products such as the 6.7-litre engine, and the new near-zero NOx ultra-low emission engine. These engines should get traction in the market as they have very low NOx emissions. In fact, the management claims that an entire fleet of 1,000 buses equipped with this new engine would have the same NOx emissions as a single 1980's era diesel bus.

Improving fundamentals

Westport during this not so exciting oil and gas price milieu has rationalized and consolidated its current product portfolio for cost reduction and margin improvement. For instance, the company reduced G&A expenses by more than 12% year-on-year basis and about 18% sequentially. Likewise, the company lowered its R&D as well as sales and marketing expenses by 28% each in the last quarter as compared to the fourth-quarter last year.

These costs reduction efforts helped the company to improve its adjusted EBITDA by 47% to a loss of $12.3 million for the quarter as compared to a loss of $23 million for the same period last year. As a result, its losses per share for the quarter improved to $0.36 per share from a $1.03 loss per share in the fourth-quarter in 2014. In fact, its losses were approximately 38% better sequentially.


Westport Innovation provides a solid long-term opportunity for the investments. It has started making progress operationally as discussed above that should help the company to tap this growing demand for natural gas vehicles more efficiently. Moreover, its investments in the technologies and products will allow the company to tap this growth at a faster rate going forward.
Published on Apr 8, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

Posted in ...