3 Keywords to Watch in Westport Innovations Inc.’s Earnings Report

Westport Innovations Inc. (TSX:WPT)(NASDAQ:WPRT) is about to release a crucial earnings report.

| More on:
The Motley Fool

It’s going to be one of the most crucial reports for investors when Westport Innovations Inc. (TSX:WPT)(NASDAQ:WPRT) releases its fourth-quarter and financial year 2015 numbers after market close on Tuesday.

First, the delay in the earnings release has been unnerving, raising concerns that the company may have some bad news to offer. Second, the first quarter of 2016 is drawing to a close, but investors are still awaiting Westport’s guidance for the year.

So what should investors expect? Here are the three keywords you need to keep an eye on in Westport’s earnings report.


What was uncertain until Westport’s last earnings release is a confirmation now. The company is merging with Fuel Systems Solution Inc. (NASDAQ:FSYS) to become Westport Fuel Systems Inc. That brings up the big question: Will Westport will take longer to break even now that it is acquiring another loss-making company?

Investors must see if Westport sticks to its 2016 EBITDA (earnings before interest, taxes, depreciation, and amortization) guidance this week. Westport last projected it would turn adjusted EBITDA positive by mid-2016 after its adjusted EBITDA losses narrowed by 57% to US$26.7 million during the nine months ended September 30, 2015.

While adjusted EBITDA is a non-GAAP measure, hitting its goal could be considered the first confirmed signs of Westport’s turnaround.


Rapidly depleting cash is one of the biggest yellow flags on Westport’s balance sheet. As of September 30, 2015, Westport held only US$42.1 million in cash, cash equivalents, and short-term investments versus US$168.8 million as of September 30, 2014.

Here, investors need to watch for two updates in Westport’s upcoming earnings report. Look for the amount of immediate cash that Westport’s merger with Fuel Systems will add to its kitty and see if Westport can continue to reduce its operating expenses after lowering them by an impressive 27% during the nine months ended September 30, 2015.

Also, if Westport can hit positive adjusted EBITDA this year, it’ll indicate a greater cash flow from its core business, which should further prevent cash burn.


Westport’s path to profitability will only become tougher if the situation in China doesn’t improve soon. Westport has substantial exposure to the market through its joint venture with Weichai Power, which is also one of its key sources of income today, besides its venture with Cummins.

If Weichai-Westport’s revenue tumbled 76% during the nine months ended September 30, 2015, Cummins’s projections of a further decline in the demand for trucks in China this year will only add to Westport’s concerns. In other words, any hint of caution about China in Westport’s report could indicate greater pain ahead for the company.

Of course, the biggest threat to Westport’s growth remains lower oil prices. Unfortunately, that isn’t under the company’s control, which is why its efforts to stay afloat matter so much now; and that’s exactly what investors need to keep an eye on.

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.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool owns shares of Cummins.

More on Investing

Red siren flashing
Dividend Stocks

Income Investors, Take Note: These Canadian Dividend Stocks Are on Fire

Here are two rallying Canadian dividend stocks you can buy now, despite broader market uncertainties.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Oversold Dividend Stocks to Buy Now for Passive Income

Top Canadian dividend stocks are on sale!

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks

Diversify Your Portfolio With these 3 Canadian ETFs for June 2023

Index funds like the iShares S&P/TSX 60 Index Fund can be good long-term investments.

Read more »

bulb idea thinking
Tech Stocks

2 Aerospace and Defence Stocks to Watch as the Sector Gains Altitude

Investors looking for a long-term play on a recovering industry should definitely consider these two aerospace and defence stocks today!

Read more »

Bank sign on traditional europe building facade
Bank Stocks

The 2 Cheapest Bank Stocks to Buy in June 2023

Canadian investors navigating a volatile market should snatch up undervalued bank stocks like Bank of Nova Scotia (TSX:BNS).

Read more »

Plane on runway, aircraft
Stocks for Beginners

Should Investors Have Cargojet Stock on Their Watchlist?

Cargojet (TSX:CJT) stock has gone through many jumps in the last five years but is down significantly in 2023. So,…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background

2 Oversold Dividend Stocks With 6% and 7% Yields

These top TSX dividend stocks have great track records of dividend growth.

Read more »


Maximize Your TFSA: Invest in These Stocks for Retirement Success

TFSA investors targeting solid capital gains in the long term could rely on these Canadian stocks.

Read more »