The maker of natural gas engine technology, Westport Innovations (WPRT, Financial) reported not so impressive results in the recently reported third quarter. The company’s revenue declined by a big margin. The stock is also unimpressive on the stock exchange and has fallen about 69% since the beginning of the year. It is trading nearly around $6.05 now.
However, Westport’s management is trying its level best to overcome this situation. It is making several strides to gain profitability and improve its market share in the coming quarters. Westport is seeking other profitable ventures which can help it to gain its lost ground. Let us have a look at some of its strategies and the challenges that it can face in the days to come.
In the recently reported third quarter, Westport’s revenue declined by 46% to $25.3 million. It missed analysts’ estimates of $27.7 million. The company also posted a loss of $25.5 million or $0.40 per share which beating consensus estimates of $0.44 per share.
How Westport plans to make a comeback?
Despite the challenging business environment Westport is trying to get over this situation. It is laser focused on its market transition plan and expects to turn around soon. The main reason for the decline Westport’s revenue is the stronger competition from gasoline engines. This happened due to the lower oil prices. Westport is expecting the geopolitical instability to continue for some more time producing good growth opportunities in the potential markets and Westport is looking to capture these upcoming opportunities. The company is focusing much on betterment in the short term rather than focusing on its long-term prospects.
It's seeing good opportunities for its business on the international front. It is getting some positive response from the countries such as China and India. Even in North America, Westport is expecting to see a good business opportunity in future. It is worried about the weakness that it is seeing in the European market which is struggling to the reduction in the government incentive and the decline in the oil prices. This is the main reason behind the weaker demands for Westport’s system and components for OEMs across Europe.
Despite the stiff market conditions, Westport is having great expectation with the OEMs and it thinks it to be a key growth driver for the company in the coming days. With the success in the OEMs the company will get a support to develop a leading edge in the natural gas technology and products. Moreover, to support its initiatives, Westport is also making significant investments in the energy markets and it is also getting a strong engagement by several potential partners who are ready to invest with the company in some of its new programs as these programs seems strong with their objective. This will help Westport to reduce its expenses and improve margins.
Impressive moves
Westport is also making impressive moves to strengthen its product portfolio with new additions. It has already announced new enhanced spark ignition engine called ESI which already impacted several OEMs. It is now focusing on bringing in medium duly dedicated natural gas vehicles which are expected to perform better and will be fuel efficient. This will also help Westport to gain enough traction in the market, improving its profitability across the end markets.
An exciting fact for Westport is that its Weichai Westport HPDI 12-litre engine recently received China V emissions certification as ready for customer fuel testing. In addition, it also has the HPDI units ready for shipment and is working with the trucking OEMs in specific way. Westport is also making advances to reprioritize its business. It is focusing on developing best in class products to strengthen its short term prospects also.
Conclusion
Moving to the fundamentals now, the company doesn’t have a trailing P/E and forward P/E as it is still making losses and will need some time to get over its weakness. But the future CAGR of 30.00% represents strong earnings growth in the next five years which is more than the industry average of 27.82%. Things are the signs that the stock can be a good long term holding. So considering everything the long term investors can definitely pick Westport but for short term the company is still making losses. So the short-term investors should wait for the right time when the company shows some concrete signs of gaining market share.
