Westport Innovations : Motley Crew Pick Stumbles

Ford Escape PHEV photographed in New York City...
Ford Escape PHEV photographed in New York City, USA. (Photo credit: Wikipedia)

May 14

Westport* (WPT : TSX : $25.44)

Westport* (WPRT : NASDAQ : US$25.43)

Trying to be ahead of the curve on this stock has been costly.Don’t try to guess where the market is heading – wait to see better results.

Motley Crew uses Westport as a top pick ( at a much higher price ) – as the ” future of transportation . Unfortunately, the company has only been able to ramp up this last year and that propelled it to less than 6000 units – a long , long way from a market leader. Regardless of American truckers wanting to switch to natural gas the lack of infrastructure deters many in the long haul business.

Last week, Westport reported Q1 revenues/GAAP EPS of $88.6 million/$(0.44)).

Overall, estimates were driven by relative outperformance by Cummins Westport (CWI) (~$13 million product revenue), with Heavy (HD) and Light Duty (LD) both relatively in line with expectations. Gross margin declined 720bps sequentially, reflecting the absence of milestone service payments under the Volvo development agreement (next expected in June quarter), product mix and increased warranty expense associated with the roll-out of newer engine models. CWI and HD shipment strength were a highlight in the quarter, while LD stands to benefit in 2012 from the Ford Motor (F)  Wing launch and a full contribution from Emer.

Management reiterated top-line 2012 guidance of $400-425 million, representing 50%+ Y/Y top line growth. The Y/Y revenue improvement is expected to be supported by organic growth across all three operating segments.

 Additional expectations:

 i) Westport LD gross margin in the mid 20%



 ii) CWI (Medium Duty) gross margin 30-35%;

iii) Westport HD margins expected to gradually ramp from break even


levels, long-term target of 20-30% (favouring higher end of the range); and

 iv) ~$5 million in Ford Wing sales in 2012 (500 units at ~$10,000 ASP), Q2/12 launch.

 Volatility likely stays elevated for WPT in the near term. Two upcoming potential WPT catalysts in May:

i) Alternative Clean Transportation Expo (May 15-17 in Long Beach); and

 ii) WPT Investor Day – May 24 in New York City.



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