Why is Westport (WPRT) up 11.9% since its last earnings report?

A month has passed since Westport Innovations’ (WPRT) last earnings report. Shares have risen about 11.9% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Westport headed for a decline? 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 better understand the important catalysts.

Westport Fuel fourth quarter profit margin, y/y sales growth

Westport Fuel Systems reported break-even per share in the fourth quarter of 2019, compared to the Zacks Consensus of a loss of a penny. This metric also compares favorably to the same quarter last year, when the company reported a loss of 8 cents per share. Higher revenues and lower operating costs led to better results.

Net income from continuing operations for the reported quarter was $0.7 million, compared to a net loss of $10.4 million reported in the fourth quarter of 2018.

Westport reported consolidated revenues of $74.3 million in the fourth quarter, up 23% year-over-year, primarily due to the strength of its transportation business and higher HPDI revenues. Moreover, the company’s revenues surpassed the Zacks Consensus Estimate of $71 million.

In the quarter, consolidated gross margin increased to $13.8 million compared to $12.3 million in the prior year. Adjusted EBITDA was $3.6 million compared to $0.2 million in the prior-year quarter.

Operational results

Transport Business Segment: Net sales in this segment increased 23% year-over-year to $74.3 million in the reported quarter on the back of solid revenues from the OEM business, primarily driven by higher sales of HPDI 2.0 products. Segment gross margin increased to $13.8 million from $12.3 million in the fourth quarter of 2018, supported by higher revenues in the current quarter.

CWI Joint Undertaking: Revenue for this segment was $102.5 million, compared to $94.1 million in the prior-year quarter, driven by higher sales volume. Gross margin was $28.3 million, up from $21 million in the fourth quarter of 2018 due to higher revenues and lower warranty costs.

Corporate Business Segment: Corporate R&D expenses decreased 150% year-over-year from $0.2 million recorded in the fourth quarter of 2018. Segment SG&A expenses were $3.8 million, down from $6.9 million in the fourth quarter of 2018, primarily due to a reduction in legal costs and the cost of a Securities and Exchange Commission (SEC) investigation.

Financial position

As of December 31, 2019, Westport had cash and cash equivalents of $46 million, compared to $61.1 million as of December 31, 2018. Long-term debt decreased to $48.9 million in the reported quarter from 55 USD .3 million as of December 31, 2018, the debt to capital ratio as of December 31, 2019 is 35.36%.

For the year ended December 31, 2019, the company’s net cash used in operating or continuing activities was $15.7 million, compared to $27.4 million as of December 31, 2018.

How have estimates changed since then?

Estimate revisions have been on a downward path over the past two months.

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