The Motley Fool

Westport Innovation’s Quarterly Release: Swing and a Miss

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. 

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.