Westport Innovations Inc. Continue To AVOID

WPRT : NASDAQ : US$16.91 WPT : TSX
AVOID

 Target: US$20.00

We have written about the research company that walks like an investment – and said avoid from – was it $40 down- despite the enthusiasm of Motley Fools- better to engage as a client of Jack A. Bass Managed funds is the lesson here.

COMPANY DESCRIPTION: Westport Innovations is a leading developer of technologies that allow engines to operate on gaseous fuels such as natural gas across light, medium, heavy and high horse power market applications.

Investment recommendation

AVOID

Macro challenges keep share volatility high, while the company works to introduce engine platforms and book orders in ‘14. The recent follow-on offering helps alleviate cash issues near-term ($210.6M cash at year-end vs. burn of $26.9M in Q4). While we continue to favor the strategy (and the nat gas macro), risk/reward stays balanced.
Investment highlights

 Few changes this quarter, as Westport finishes a challenging 2013 and looks to transition from R&D phase to increased product adoption in 2014 (with heightened focus on cost optimization and prioritized investments  goal of breakeven adjusted EBITDA for all three units by year-end).
 The outlook for 2014 implies solid growth (~7-13%), despite a ~$25M headwind from discontinuation of first generation HPDI (as focus turns to roll-out of HPDI 2.0 and expectation of improved warranty accruals – work underway with several OEMs currently).
 CWI and Weichai continue to grow nicely, with both JVs reporting record volumes for the year (2014 expected to benefit from ramp of ISX12G and build-out of additional capacity at Weichai). Early opportunities in rail/mining/marine also continue to progress nicely.
 Our 2014 revenue/EPS estimates go to $184M/$(1.80) from $241M/$(1.90); F2015 is introduced at $300M/$(0.90).
Valuation Our $20 price target (from $28) is derived by applying a 4x multiple to our 2015 sales estimate of $300M

Canadian Tire Corporation Ltd.

No Longer ” Crappy Tire” )

CTC.A : TSX : C$96.97
BUY 
Target: C$109.00 
COMPANY DESCRIPTION:
Canadian Tire is Canada’s most shopped general merchandise retailer, operating stores under the Canadian Tire, Mark’s, and PartSource banners. Through Canadian Tire Financial Services the company also manages a portfolio of credit card receivables.
All amounts in C$ unless otherwise noted.

Consumer & Retail — Merchandising
SOLID QUARTER, DIVIDEND RAISE WELL RECEIVED
Investment recommendation
We are reiterating our BUY rating and C$109.00 target price following Canadian Tire’s Q3/13 earnings results.
Investment highlights
 Canadian Tire reported Q3/13 earnings results on Thursday morning, before the market open. Revenue increased 4.5% YoY to $2,956 million. EPS of $1.79 was in-line with our estimate, and above consensus of $1.76 and last year at $1.61. The company also announced a 25% increase to its quarterly dividend to $1.75 per share.
 Retail appeared to be firing on all cylinders during the quarter, with healthy same-store sales growth at all banners. CTR, Forzani, and Mark’s delivered 2.0%, 6.3% and 4.3% increases in same-store sales, respectively. At CTFS, a 118 bps YoY decline in write-off rates to 5.74% allowed the company’s return on receivables to increase to 7.21% from 6.68% last year. EBT at CTFS increased to $80 million, up 8.5% YoY.
 Looking forward, we expect continued strength at the company’s Retail division as we head into the holiday season, with management noting that inventories remain in a healthy position in advance of Q4/13. Furthermore, we believe investors will focus on the potential announcement of a credit card partnership over the next 12 months which we believe should unlock meaningful cash for Canadian Tire.
Valuation
Our 12-month C$109.00 target price reflects our sum-of-the-parts valuation, whereby we value the company’s real estate, Retail division, and Financial Service division separately.

Linamar Corp. Raising Target Price To $43

LNR : TSX : C$35.67
BUY 
Target: C$43.00

COMPANY DESCRIPTION:
Linamar is a leading industrial manufacturer specializing in machined automotive components (mainly engine, transmission and other driveline components) and other industrial systems (aerial work platforms and related products, energy product assemblies, agricultural equipment assemblies). The company operates principally from Guelph, Canada but it has growing operations in Europe, the U.S., Mexico and Asia.
All amounts in C$ unless otherwise noted.

Transportation and Industrials — Auto Components
Q3/13: LARGE POSITIVE SURPRISE, FORECAST, TARGET BOOSTED
Continue to recommend BUYing for good growth potential
LNR remains attractive for a strong EPS growth profile from strong organic sales growth in its Powertrain/Drivetrain (P/D) automotive segment and sales growth and margin expansion in its Industrial segment.
Q3/13 results were consistent with this thesis and then some. We boosted our target on a slightly stronger mid-term forecast, powered by slightly stronger sales and margin assumptions, and our usual one-quarter valuation period roll forward.
Q3/13: large beat on sales and margins
EPS came in at $0.80, much stronger than our $0.64 forecast and the consensus mean estimate of $0.66. EPS was up a healthy 54% YOY.
LNR is clicking on most cylinders. P/D benefited from launches and strong industry volumes. Industrial continues to rebound but remains below potential. P/D sales and margins and Industrial margins all came in stronger than we expected.
LNR guided to very strong margins in 2014 (in the same ballpark as the very strong 2013 margins). This was a large upside surprise. Sales expectations are good too.
We boosted our 2014 forecast on the margin guidance upside surprise. Mid-term prospects appear relatively unchanged, suggesting an eventual margin decline at P/D. Our mid-term forecast is only slightly stronger.
Premium valuation given growth and industry outlook
We continue to value LNR at 5.75x EV/NTM EBITDA (5.75x Q3/14E EV to Q4/14E – Q3/15E EBITDA), which is about 0.75x higher than normal. We are using a premium multiple given LNR’s growth and excellent industry fundamentals.

Atmel Corporation

ATML : NASDAQ : US$6.58
BUY 
Target: US$9.00

COMPANY DESCRIPTION:
Atmel Corporation designs, develops, manufactures and sells a broad range of advanced logic, microcontroller,
nonvolatile memory, radio frequency (RF), and capacitive touch solutions. The company’s products are designed for
use in the automotive, communications, computing/storage/printing, consumer electronics , industrial/military/aerospace, and security end markets

REITERATE BUY ON MARGIN EXPANSION
Investment recommendation
We reiterate a BUY ahead of what we believe is likely to be strong gross margin expansion. Q4 gross margins are guided up Q/Q due to higher utilization rates and continued cost reduction efforts. Management expects gross margins to continue to improve in 2014 as utilization improves; they control operating costs and use up the higher cost inventory from the take or pay foundry agreements. We are slightly adjusting our estimates and maintain a $9 target.
Investment highlights
 ATML reported Q3/13A (Sep) after the close. Revenues and non- GAAP EPS were $356.3 million (+2% Q/Q) and $0.09, compared to our inline estimates of $357 million and $0.09. Revenue was slightly below the mid-point of guidance ($348M to $365M)
 Management guided revenue to be in the range of $340 million to $364 million ($357 million mid-point), compared to consensus estimate of $365 million and our estimate of $359 million. Management expects MCU to be flat Q/Q with maxTouch down low single digits and core MCU up single digits, ASIC to be down low double digits, Memory down mid to high single digits and RF & Automotive up low single digits.
 Atmel’s board authorized an additional $300M to the existing $700M stock repurchase program, of which ATML has repurchased approximately $636.3M (72.1M shares) of its common stock

Westport : Relying on Motley Fool PR and Cramer

English: CNBC’s “Mad Money with Jim Cramer” ca...

English: CNBC’s “Mad Money with Jim Cramer” came to Tulane University’s Freeman School of Business Oct. 19, 2010 to broadcast in front of a live audience as part of the show’s “Back to School Tour.” (Photo credit: Wikipedia)

As noted here there is a long term trend to natural gas as a real alternative to oil. However, Motley Fool ( in a run up to $40) and so many others have urged investors to climb aboard before the train is ready to leave the station. by that i mean that there is still little infrastructure to support natural gas vehicles on the road. the long term trend is in – profits are still years away .

  • Westport Innovations (WPRT +0.8%) enjoys a bump after Jim Cramer says WPRT iswell positioned as more trucks turn to natural gas.
  • CEO David Demmers tells Cramer that just 1% of all trucks in the U.S. are running on natural gas, but the trendline points to growth; many in the industry are racing to build the proper infrastructure to meet expected demand. (video)
  • Nat gas is cleaner and cheaper than diesel, and wide availability in the U.S. and China will make it a popular energy source for years to come, the CEO says.
  • WPRT also has a strong partnership with Ford, with its technology included in 11 vehicles and in the F-150 starting next year.

WESTPORT INNOVATIONS INC(WPRT:NASDAQ, US)

BuySell
27.56USDIncrease0.22(0.80%)Volume:
Above Average
As of 04 Sep 2013 at 11:36 AM EDT.
S

QUOTE DETAILS

Open 27.26 P/E Ratio (TTM)
Last Bid/Size 27.52 / 1 EPS (TTM)
Last Ask/Size 27.60 / 3 Next Earnings
Previous Close 27.34 Beta
Volume 300,264 Last Dividend
Average Volume 386,347 Dividend Yield 0.00%
Day High 27.65 Ex-Dividend Date
Day Low 27.05 Shares Outstanding 56.5M
52 Week High 35.40 # of Floating Shares
52 Week Low 23.01 Short Interest as % of Float
chart

Magna International Inc. A Growth Story

Mila (concept car division of Magna-Steyr) Alp...

Mila (concept car division of Magna-Steyr) Alpin, 2008, seen at MOTOR SHOW ESSEN 2010 (Photo credit: Wikipedia)

MGA : NYSE : US$81.16
MG : TSX : C$83.90
BUY
Target: US$89.00

COMPANY DESCRIPTION:
Magna is a one of the world’s largest and most diversified Tier 1 automotive components suppliers, active in 25 countries. The company also provides complete vehicle assembly services through its subsidiary, Magna Steyr.
All amounts in US$ unless otherwise noted.

BUY for strong growth story
We continue to recommend BUYing MGA to benefit from good EPS growth from modest sales growth, margin expansion and share buy backs. Margins should especially benefit from European and eventually emerging market (Rest of World or ROW) operating improvements and lower new facility costs.
Net, we expect these factors to drive low double-digit EPS growth/year. 
Management meetings reconfirm growth potential

Highlights include:
 European margin improvement could happen faster than expected,  There is upside potential to MGA’s European margin improvement target,
 MGA’s product mix seems likely to evolve, but we do not expect it to change substantially, as MGA is already a leader in most of its product areas, and
 We expect free cash flows to be spent on acquisitions and/or share buy backs, which should drive EPS growth. We expect acquisition discipline and acquisition opportunities to be lower.
High valuation, but supported by positive growth dynamics MGA’s valuation remains on the high side (see valuation section), but we think it can remain there given positive industry and company dynamics. Such dynamics support good EPS growth and the potential for upside surprises and positive forecast revisions, as per this quarter.
We have maintained our valuation multiple at 6.0x EV/NTM EBITDA, a roughly 1x multiple premium to MGA’s normal range given the positive growth dynamic thesis. The resulting target is moderately above our $83.27 DCF analysis.

Magna International Inc. BUY Target $ 75

Mila (concept car division of Magna-Steyr) Alp...

Mila (concept car division of Magna-Steyr) Alpin, 2008, seen at MOTOR SHOW ESSEN 2010 (Photo credit: Wikipedia)

MGA : NYSE : US$64.71
MG : TSX
BUY
Target: US$75.00

COMPANY DESCRIPTION:
Magna is a one of the world’s largest and most diversified Tier 1 automotive components suppliers, active in 25 countries. The company also provides
complete vehicle assembly services through its subsidiary, Magna Steyr.

Substantial Q1/13 upside surprise, guidance increased MGA reported EPS of $1.57, ahead of our $1.44 and the consensus mean $1.44. Positive surprises versus our forecast were on European sales and margins. 2013 guidance was also modestly increased.
We boosted our near-term forecast slightly given the guidance and boosted our mid-term forecast more significantly to model better European margins (but consistent with management’s goals). EPS was also boosted by our assumption that all of MGA’s current 12 million share buy back will be utilized, per management’s commentary.
Solid EPS growth expected
MGA produced 18% EPS growth in 2012 from strong North American sales and improved European margins. We forecast annual EPS growth
to slow to high single-digit to low double-digit rates through mid-decade from expectations of slowing industry growth in North America,
eventual gradual recovery in Europe, and modest margin expansion. Solid upside, with additional potential
We continue to recommend BUYing MGA for solid EPS growth, modest multiple expansion, and the potential for additional value creation from
cash deployment and/or business streamlining.
We expect EPS growth from forecast low- to mid-single-digit sales growth, based on booked business and gradual margin improvements in
Europe and Rest of World (ROW) segments.
We have boosted our valuation 0.5x to a 5.5x EV/NTM EBITDA multiple, as we think there is increasing investor interest in consumer growth
cyclical stocks like MGA. Our valuation and target is supported by our $77.61 DCF analysis.
Our target was boosted nicely (17%) this quarter based on the forecast increase, benefit from our usual one-quarter valuation period roll forward,
and the valuation boost.

Magna International Inc.

Mila (concept car division of Magna-Steyr) Alp...

Mila (concept car division of Magna-Steyr) Alpin, 2008, seen at MOTOR SHOW ESSEN 2010 (Photo credit: Wikipedia)

Nov. 9

Magna International Inc.

MGA  NYSE  $ 44.67

MG  TSX

 

COMPANY DESCRIPTION:
Magna is a one of the world’s largest and most diversified Tier 1 automotive components suppliers, active in 25 countries. The company also provides complete vehicle assembly services through its subsidiary, Magna Steyr.

BUY for attractive valuation, but growth looks limited
MGA has been a strong share price performer in 2012, in part due to nice EPS growth and more so from valuation expansion. We think the stock has more valuation expansion potential, although this may be limited by sector valuations. We believe EPS growth is set to slow.
Our forecast was increased in this report due to company specific adjustments, which contributed to the increase in our target price. We think the share price appreciation potential remains attractive assuming a relatively normal 5x EV/NTM EBITDA multiple. Our target is supported by our $68.42 DCF.
Beat on Rest of World (ROW) EBIT; guidance raised
MGA reported EPS of $1.13, ahead of our $1.05 estimate and the consensus mean of $1.01. MGA’s 2012 sales guidance was stronger than we expected and we adjusted our Q4/12 forecast slightly higher.
After reviewing Q3/12 results and guidance and assessing trends, we boosted our sales forecast and North American and ROW margins.
Slowing EPS growth expected in next couple of years
We believe MGA is on track for solid double-digit EPS growth in 2012 from strong North American sales and improved European margins. We forecast high-single-digit annual EPS growth from 2012-14 due to slowing industry growth in North America and industry weakness in Europe. We expect these factors to limit sales growth and margin expansion.
Looks inexpensive, but normal valuation spread relative to the group
MGA’s valuation looks attractive relative to its historical multiples and DCF, but normal relative to the group. We think this suggests the potential for an upward bias in valuation, but the upside potential is probably limited by group valuation moves.

General Motors – As GM Goes So Goes The Economic Recovery ?

Sequel, a hydrogen fuel cell-powered vehicle f...

Sequel, a hydrogen fuel cell-powered vehicle from General Motors. (Photo credit: Wikipedia)

General Motors (GM : NYSE : US$25.50)

A solid third quarter gives optimists reasons to believe .

Q 3 EPS were $ .85 on revenue of $37.6 billion while analysts were expecting $0.60 on revenue of $35.7 billion. Results were strong across the board, with North America leading the way posting a profit of $1.8 billion. Europe is still expected to lose $1.5 billion to $1.8 billion for the full year, though some analysts have said that this number could have been worse. Additionally, 30% of eligible retirees are accepting pension buyout offers which will eliminate $29 billion of the company‟s pension liability

. CFO  ( Dan Ammann  ) said that the company‟s improved revenue was a split between increases in pricing and volume and that negative foreign currency impacts trimmed $1 billion from the top line.

Separately, the company said that vehicle sales in the northeast U.S. will be hurt by Hurricane Sandy, although it did not provide a specific estimate.

Westport Innovations – Update

English: Revenue stamp (2pi) for financing the...

English: Revenue stamp (2pi) for financing the construction of Hejaz Railway in the Ottoman Empire. Listed as No. 17a in W. McDonald’s Revenues of Ottoman Empire and Republic of Turkey. See also Ottoman Turkish Empire Revenue Stamps of the Hejaz Railway by Steve Jaques, Troy, 2009, pp.22 (Photo credit: Wikipedia)

Westport* (WPT : TSX : $39.13)
Westport* (WPRT : NASDAQ : US$39.04)

August 7

Shares of Westport Innovations jumped after the company reported their Q2/12 results. For the quarter, the
company reported consolidated revenues of $106.1 million compared with $44.9 million for the same period last year, an
increase of 136.3%.

Earnings were reported at a net loss of $6.1 million ($0.11 loss per share) compared with a net loss of $18.1
million ($0.38 loss per share) for the same period last year.

Breaking down its segments, WPT reported Westport Light-Duty (LD) revenue, which where up 182.2% to $30.7 million, Cummins Westport (CWI) revenue jumped 78.5% to $57.0 million with 1972 engines shipped, and Westport Heavy-Duty (HD) revenue was up 111.3% to $4.3 million with 75 systems shipped.

Service and other revenue was reported at $14.1 million.

CEO David Demers commented, “Key segments of the transport market have begun the inevitable shift from petroleum based fuel to engines powered by cleaner burning, low cost methane (natural gas), and Westport has a substantial presence in each market.” Demers also noted, “We are seeing strong growth in all segments and in all of our global markets, and despite challenging macroeconomic conditions, we expect this to accelerate as new infrastructure comes on stream over the next two years and as we launch new products, opening up significant new
addressable markets.”

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