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Westport (WPRT) Up 8.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Westport Innovations (WPRT - Free Report) . Shares have added about 8.5% in that time frame, outperforming the S&P 500.

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

Westport Q2 Earnings Surpass Estimates

Westport reported earnings per share of 2 cents in second-quarter 2020, as against the Zacks Consensus Estimate of loss of 8 cents. The company had reported a loss of 2 cents per share in the year-ago period. Higher revenues in the Corporate Business segment resulted in this outperformance.

Net income from continuing operations in the reported quarter was $3 million, as against the net loss of $2.3 million posted in second-quarter 2019.

Westport registered consolidated revenues of $36 million in the second quarter, down 56.1% year over year. The revenues also missed the Zacks Consensus Estimate of $38 million.

During the second quarter, consolidated gross margin decreased to $12.2 million from the prior year’s $19.3 million on lower overall sales and contractual HPDI price reductions. Adjusted EBITDA amounted to $6.2 million compared with the prior-year quarter’s profit of $8.1 million.

Operational Results

Original Equipment Manufacturer Segment (OEM): Net sales of the segment plummeted 57.4% year over year to $19.1 million in the reported quarter mainly due to the coronavirus crisis-related shutdowns, and lower light-duty OEM sales to Russian and German OEMs. The segment’s operating income came in at $1.1 million, as against the loss of $3 million incurred in second-quarter 2019.

Independent Aftermarket Segment (IAM): Net sales of the segment plunged 55% year over year to $16.9 million in the reported quarter on the pandemic-induced supply-chain disruptions. The segment reported an operating loss of $1.2 million, as against the prior-year quarter’s profit of $3.5 million.

CWI Joint Venture (50%): This segment’s revenues totaled $33.2 million, down from the year-ago quarter’s $42 million. Operating income was $5.3 million, down from the second-quarter 2019 level of $7.8 million primarily on dismal revenues.

Corporate Business Segment: Operating profit of the segment amounted to $1.8 million, as against the operating loss of $6.4 million incurred in the year-earlier period. The segment’s depreciation and amortization expenses came in at $0.1 million, flat year over year.

Financial Position

Westport had cash and cash equivalents of $29 million as of Jun 30, 2020, down from $46 million as of Dec 31, 2019. Total debt rose to $5.3 million in the reported quarter from $49 million as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 26.67% due to these changes.

VGM Scores

At this time, Westport has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 D. 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 these revisions looks promising. It comes with little surprise Westport has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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