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Westport (WPRT) Up 96.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Westport Innovations (WPRT - Free Report) . Shares have added about 96.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Westport Fuel Q3 Earnings and Revenues Top Estimates

Westport Fuel reported earnings per share of 1 cent in third-quarter 2020. Notably, the Zacks Consensus Estimate was pegged at a loss of 4 cents. However, the reported figure comes in lower than the earnings of 4 cents per share recorded in the year-ago period.

Net income from continuing operations in the reported quarter was $0.8 million, down from the $4.9 million posted in third-quarter 2019. Unfavorable impacts of COVID-19, warranty-related charges, and a one-time gain on settlement resulted in this downside.

Westport Fuel registered consolidated revenues of $65.4 million in the third quarter, down 13% year over year. The reported figure, however, surpassed the Zacks Consensus Estimate of $53 million.

During the third quarter, consolidated gross margin decreased to $10 million from the prior year’s $17.9 million on lower overall sales and contractual HPDI price reductions. Adjusted EBITDA amounted to $4 million compared with the prior-year quarter’s profit of $9.4 million.

Operational Results

Original Equipment Manufacturer Segment (OEM): Net sales of the segment climbed 3% year over year to $37.4 million in the reported quarter mainly on increase in sales volume in the HD OEM business, partially offset by the price reduction of the HPDI product. The segment’s operating loss came in at $4.9 million, much wider than the loss of $0.9 million incurred in third-quarter 2019.

Independent Aftermarket Segment (IAM): Net sales of the segment slid 11.2% year over year to $28 million in the September-end quarter on the prevailing negative impact of the pandemic and related shutdowns. The segment reported an operating income of $1.7 million, lower than the prior-year quarter’s profit of $3.9 million.

CWI Joint Venture (50%): This segment’s revenues totaled $42.2 million during the July-September period, up from the year-ago quarter’s $41.5 million. Operating income was $6.3 million, slightly down from the third-quarter 2019 level of $6.6 million primarily on dismal revenues.

Corporate Business Segment: During the reported quarter, operating profit of the segment amounted to $0.05 million, as against the operating loss of $4.3 million incurred in the year-earlier period. The segment’s depreciation and amortization expenses came in at $54,000, up from the $47,000 incurred in the prior-year quarter.

Financial Position

Westport Fuel had cash and cash equivalents of $46.3 million as of Sep 30, 2020, up from $46 million as of Dec 31, 2019. Total debt came in at $76 million as of Sep 30, 2020, compared with the $49 million as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -133.33% 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Westport has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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