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Westport (WPRT) Down 13.3% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Westport Innovations (WPRT). Shares have lost about 13.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Westport due for a breakout? 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 Q2 Loss Narrower Than Expected, Revenues Up

Westport incurred a loss of 7 cents per share in second-quarter 2022 against a profit of 7 cents in the year-ago period. The figure was narrower than the Zacks Consensus Estimate of a loss of 8 cents. Westport registered consolidated revenues of $80 million in the quarter, beating the Zacks Consensus Estimate of $75.9 million. The top line rose 1% from the year-ago level of $79 million.

Westport generated a negative adjusted EBITDA of $4.3 million in the second quarter against $6.2 million in the year-ago period. This was mainly due to pressure from supply chain & inflation on production cost.

Segmental Takeaways

Original Equipment Manufacturer (OEM): Net sales of the segment jumped 14.4% year over year to $54.2 million in the reported quarter, mainly due to additional revenues from the acquired Stako sp. zo.o fuel storage business, increased light-duty OEM business sales volumes to OEMs in India and higher sales volume in electronic and hydrogen products. The segment reported an operating loss of $5.6 million, wider than the loss of $3.4 million incurred in the year-ago period. In the quarter, gross margin decreased to $4.7 million or 9% of revenues compared with $7.2 million or 15% of revenues in the year-ago quarter due to reduced sales volumes to the European OEM customers caused by higher relative CNG fuel prices.

Independent Aftermarket (IAM): Net sales of the segment totaled $25.7 million, down 18.6% from the year-ago period, primarily due to decreased sales volumes to Russian customers due to the Russia-Ukraine war, lower sales volumes to Argentina and Turkey and a fall in sales to Africa. In the quarter, the segment incurred an operating income of $0.08 million, plummeting from $1.1 million in second-quarter 2021. Gross margin in the quarter decreased to $5.8 million or 23% of revenues compared with $8.5 million or 27% of revenues in the year-ago period. The decrease was led by lower sales volumes and higher production input costs incurred in materials, transportation and utility costs brought by the global supply chain shortage and inflation.

Corporate Business Segment: In the reported quarter, operating loss for the segment amounted to $5.8 million, widening from the loss of $1.4 million reported in the year-earlier period.

Financials

Westport had cash and cash equivalents of $98.2 million as of Jun 30, 2022, down from $124.9 million at end of 2021. Long-term debt decreased to $37.2 million at the end of second-quarter 2022 from $45.1 million on Dec 31, 2021. Net cash flow used in operating activities was $16.5 million, a sharp increase from $8.7 million from the prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Westport has a poor Growth Score of F, a grade with the same score on the momentum front. However, 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 F. 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 this revision has been net zero. Notably, Westport has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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