Westport (WPRT) Down 26% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Westport Innovations (WPRT). Shares have lost about 26% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Westport due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Westport Fuel Q3 Earnings & Revenues Beat Estimates

Westport Fuel Systems Inc. incurred a loss of 1 cent per share in third-quarter fiscal 2019, narrower than the Zacks Consensus Estimated a loss of 3 cents. The same was 9 cents in third-quarter 2018.

Net income from continuing operations in the reported quarter was $4.9 million against a net loss of $12.1 million in third-quarter fiscal 2018. The improvement was aided by higher gross margin from transportation businesses and lower operating expenses due to reduced Securities Exchange and Commission (SEC) expenses.

Westport Fuel logged consolidated revenues of $75.4 million in the reported quarter, up 15.1% year over year, mainly on strength in its transportation businesses and higher HPDI revenues. Moreover, the company’s revenues surpassed the Zacks Consensus Estimate of $73 million.

During the quarter under review, consolidated gross margin increased to $17.9 million from $15.6 million a year ago. Adjusted EBITDA amounted to $9.4 million compared with $4.3 million in the prior-year quarter.

Operational Results

Transportation Business Segment: Net sales at the segment increased 15% year over year to $75.4 million in the reported quarter on increased revenues from the OEM business, mainly driven by higher HPDI 2.0 product sales and service revenues. The segment’s gross margin rose to $17.9 million from $15.6 million in third-quarter 2018, aided by higher revenues during the current quarter.

CWI Joint Venture: This segment’s revenues totaled $83.1 million, down from the year-ago quarter’s $86.2 million due to lower sales volume. Gross margin was $22.7 million, down from the third-quarter 2018 level of $27.3 million owing to lower revenues and a negative warranty adjustment of $3.8 million.

Corporate Business Segment: Research and Development expenses in the segment declined to $0.2 million from $0.4 million a year ago. This segment’s SG&A expenses was $3.4 million, down from the third-quarter 2018 level of $9.7 million, mainly driven by a reduction in legal and advisory cost for the SEC investigation and lower professional & consulting fees.

Financial Position

Westport Fuel had cash and cash equivalents of $37.4 million as of Sep 30, 2019, down from $61.1 million as of Dec 31, 2018. Long-term debt declined to $44.9 million in the quarter under review from $55.3 million as of Dec 31, 2018. The debt-to-capital ratio stands at 40.39%, as of Sep 30, 2019.

For the three months ended Sep 30, 2019, the company’s net cash used in operating activities of continuing operations was $3.2 million compared with $12.3 million in the three months ended Sep 30, 2018.

Guidance

For 2019, the company projects consolidated revenues from continuing operations of $295-$305 million, up from previously mentioned $285-$305 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 166.67% due to these changes.

VGM Scores

At this time, Westport has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Westport has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Westport Fuel Systems Inc. (WPRT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.