Westport Innovations: a Screaming Buy or Sell?

Westport Innovations (WPRT) announced first quarter ended March 31, 2016 total revenue of $24.0 million, down 14.3 percent year-over-year from $28.0 million during the same period last year.

Westport declared first quarter of 2016 net loss of $23.3 million or $0.36 per share, up 35.5 percent year-over-year from a net loss of $17.2 million or $0.30 per share in first quarter of 2015.

What next?

The innovative natural gas engines and vehicles manufacturing company reported continued year-over-year decline in both its top and bottom lines primarily due to weaker global demand for the company’s light-duty aftermarket products amid weak oil price.

Westport is believed to currently have a strong revenue base and is much ahead of several of its key competitors which is expected to increasingly attract new investors looking to invest in superior vehicle manufacturing and related technologies development companies and thus, drive sustainable long-term shareholder returns.

Globally, the crude oil prices have continued to decline by over 50% since their latest peak achieved during June 2014 and mainly due to expanding production of shale-oil in the U.S., refusal of OPEC or Saudi Arabia to weaken production to support crude prices, huge or near-to-huge production from most of the key producers, incomplete supply of crude from Iran and smaller worldwide demand expansion.
Considering the supply pipeline, the cost of natural gas is 72% and 74% lesser than oil during 2014 and 2015 respectively and mainly due to the continuing weaker global commodity demand and pricing environment.

Despite the continuing weaker international commodity demand and pricing environment, Westport is successful in delivering superior top line growth, much ahead of several of its key competitors which highlights the unique growth strategy of the company targeted towards delivering impressive overall growth while offering attractive shareholder returns.

Considering the oil shock during the third and fourth quarters of 2014, Westport promptly acted to right-size its business by deferring non-core development programs and reducing its staff while sustaining core OEM growth commitments. Further, the strategic merger of FSYS with Westport illustrates and delivers advanced engineering and innovation making capabilities of both the companies. The consolidated company is expected to have filed more than 600 patents in LPG/LNG/CNG module and systems globally. This key combination of a robust intellectual property standing, significant commercialization initiatives and advanced prolific growth efforts is believed to support in expanding the product pipeline for complete industry.

Gas as a transportation fuel has already seized a majority of China’s truck and bus market share including 10 to 13 L WWI engines capturing nearly 3% total share of approximately 275,000 10 to 13L truck engine sales during 2015 and 9 to 13L WWI engines having about 8% share of the advanced 9 to 13L total bus engine sales during 2015. Also, the total year-over-year bus and truck engine shipments including Weichai Westport and Cummins Westport continue to grow significantly and highlight the superior expansion strategy of the company.

Westport is notably focused on delivering sustainable long-term company growth by adopting a cost-optimization strategy targeted towards minimizing non-core expenditures while investing in the complete and globally diversified company growth.

The natural gas powered vehicles are continuing to gain robust customer traction and are expected to increasingly capture a majority of the total world market over the next 10 years from 2015 till 2025 and thus offer an attractive growth opportunity for Westport which is aggressively investing into manufacturing technologically-advanced engines and other NGV components.


Overall, the investors are advised to “Hold” their position in Westport Innovations Inc. considering the company’s significant long-term growth prospects but currently weaker financial position to support the cause with significant total debt of $62.45 million against a weaker total cash position of $27.84 million, restricting the company to continue with its daily operations profitably. The profit margin of -95.24% signifies no profit but loss. The PEG ratio of -0.08 appears misguiding and indicate no company growth but decline.
Published on May 18, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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