Westport Innovation’s Quarterly Release: Swing and a Miss

Revenues and earnings are one thing, but there’s a more important metric that Westport investors need to be aware of.

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

One of Canada’s most innovative companies, Westport Innovations (TSX:WPT,NASDAQ:WPRT) reported its quarterly earnings after yesterday’s close.  Based on the market’s reaction, with the stock currently off by more than 12%, the results were a disappointment.

The consensus estimate for Westport’s 2nd quarter EPS was for a loss of $0.49.  The company checked in with a loss of $0.61.

Reported revenues of $34.9 million also missed the estimate of $43.2 million and were lower than the $49.1 million the company booked in last year’s second quarter.

In addition, the company also dropped its full year 2013 revenue guidance range to $160-$180 million.  This range had been $180-$200 million.

Though disappointing, even at the low end of this range, it still indicates a much stronger second half of the year for Westport.

The real issue

Westport’s products are still in their relative infancy and therefore top and bottom line quarterly misses shouldn’t be all that concerning to those investors that believe that this story has legs over the long-term.

What should however be a concern to Westport’s investors is the rate at which the company is plowing through cash.  The company’s cash balance at the end of the second quarter stood at $135 million.  This is down from $276 million at the same time last year.  A 51% year-over-year decline.  And at least one analyst (Raymond James) is forecasting that this cash burn will continue, although at a declining rate, through 2014.

The company’s cash balance was built up by an equity raise in the first quarter of 2012.  Should the drawdown continue, investors have to at least partially expect something similar to occur at some point in the next year or so.

The Foolish Bottom Line

Westport seemingly has a brilliant piece of technology and the company is gaining traction in a market with almost endless possibilities.  However, for shareholders to benefit, this technology needs to be monetized – soon.  Otherwise, the company’s long-term prospects could be squashed by the more near-term financial reality that it faces.

Westport is a leader in an unproven industry.  Many of today’s best companies started out the same way and have gone on to make their shareholders billions (and billions, and billions) of dollars richer.  3 such companies are profiled in our special FREE report “3 U.S. Stocks Every Canadian Should Own”.  Simply click here and we’ll send you this report – absolutely FREE!

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool owns shares in Westport Innovations. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

growing plant shoots on stacked coins
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy Now and Own for 25 Years

These top TSX dividend stocks look oversold and now offer attractive yields for TFSA and RRSP investors.

Read more »

money cash dividends
Investing

Passive-Income Power: How to Make $105/Week TAX FREE in a Bear Market

Investors may want to pursue a passive-income strategy in this bear market by snagging dividend stocks like Freehold Royalties Ltd.…

Read more »

Money growing in soil , Business success concept.
Energy Stocks

3 Growth Stocks up +30% in 2022

These three growth stocks are up over 30% in 2022 alone but have come down in the last few weeks…

Read more »

Oil pumps against sunset
Energy Stocks

2 Energy Stocks That Jumped Over 60% This Year

Consider investing in these two energy stocks amid the recent pullback after putting up stellar gains earlier this year.

Read more »

Profit dial turned up to maximum
Dividend Stocks

RRSP Investors: 2 Undervalued TSX Stocks to Buy Now for Total Returns

Top TSX dividend stocks are now on sale for RRSP investors seeking attractive total returns.

Read more »

TFSA and coins
Dividend Stocks

2 Beaten-Down Stocks to Buy for Your TFSA

Two beaten-down, but high-yield TSX stocks are profitable options for TFSA investors.

Read more »

Volatile market, stock volatility
Stocks for Beginners

3 Top TSX Stocks to Buy in Volatile Markets

Sitting on cash? Consider these three TSX stocks for the long term.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

Inflation Soars to 7.7%: 1 Dividend Stock to Buy Now

Enbridge (TSX:ENB)(NYSE:ENB) stock looks like a magnificent dividend stock to help Canadians deal with inflation at 7.7%.

Read more »