It has been about a month since the last earnings report for Westport Innovations (WPRT). Shares have added about 17.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Westport due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Westport Q3 Loss Narrows Y/Y
Westport incurred a loss of 68 cents per share in third-quarter 2023, narrower than the Zacks Consensus Estimate of a loss of 75 cents. The loss also narrowed from 70 cents per share incurred in the year-ago period. Westport registered consolidated revenues of $77.4 million in the quarter, in line with the Zacks Consensus Estimate. The top line rose from $71.2 million generated in the corresponding quarter of 2022. The company delivered an adjusted EBITDA of negative $3 million in the quarter under review compared with negative $4.5 million recorded in the year-ago period.
Segmental Takeaways
Original Equipment Manufacturer (OEM): Net sales of the segment totaled $52.9 million, up from $44.1 million in the third quarter of 2022. The upside was mainly due to higher sales volumes in the delayed OEM, electronics, and fuel storage businesses. Additionally, increased engineering service revenues from the heavy-duty OEM business aided results. The metric also surpassed our estimate of $46.8 million.
The segment reported an operating loss of $6.2 million, narrower than a loss of $7.3 million incurred in the year-ago period and our forecast of $8.7 million. Gross margin increased to $7.8 million (15% of revenue) from the year-ago period’s level of $4.7 million (11% of revenue), driven by increased sales volumes in delayed OEM, electronics and fuel storage businesses, partly offset by high commodity and labor costs coupled with logistical challenges.
Independent Aftermarket (IAM): Net sales of the segment totaled $24.5 million compared with $27.1 million in the year-ago period. The metric missed our estimate of $29.6 million. The IAM segment reported an operating loss of $0.9 million against an income of $2.2 million generated in the year-ago period. Our forecast for operating income was $1.2 million.
In the quarter, the gross margin contracted $1.2 million to $5.4 million, representing 22% of revenues. This compares to $6.6 million (24% of revenues) in the third quarter of 2022. Lower sales volumes in Africa and Europe hurt sales and margins.
Financials
Westport had cash and cash equivalents of $44 million as of Sep 30, 2023, down from $86.2 million at the end of 2022. Long-term debt decreased to $23.2 million at the end of third-quarter 2023 from $32.2 million on Dec 31, 2022.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Westport has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Westport has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Westport is part of the Zacks Automotive – Original Equipment industry. Over the past month, BorgWarner (BWA), a stock from the same industry, has gained 1.1%. The company reported its results for the quarter ended September 2023 more than a month ago.
BorgWarner reported revenues of $3.62 billion in the last reported quarter, representing a year-over-year change of -10.8%. EPS of $0.98 for the same period compares with $1.24 a year ago.
BorgWarner is expected to post earnings of $0.89 per share for the current quarter, representing a year-over-year change of -29.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.7%.
BorgWarner has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Westport Fuel Systems Inc. (WPRT) : Free Stock Analysis Report
BorgWarner Inc. (BWA) : Free Stock Analysis Report