Westport Innovations Inc. (USA) (NASDAQ:WPRT), engineering the world’s most advanced natural gas engines and systems, today reported financial results for the second quarter ended June 30, 2015 and provided an update on operations. All figures are in U.S. dollars unless otherwise stated.

Westport continues to deliver on key corporate development milestones, launching industry-leading products while cash and investment discipline demonstrates steady progress toward the goal of consolidated positive adjusted EBITDA by mid-2016. In the second quarter of 2015, Westport announced the introduction of the new Volvo Car Drive-E powertrain bi-fuel engine, EPA certification of 2015 Ford Transit Van, the new Ford F-150 bi-fuel product, and the completion of a major engine program with its fifth HPDI engine customer. There are several key activities that continuously expand the markets for Natural Gas Vehicles (“NGV”) while the backdrop of foreign economies and petroleum-based fuel pricing provides a challenge for some of Westport’s business lines.

Westport achieved a significant improvement in Westport Consolidated adjusted EBITDA for the second quarter of 2015 compared to the same period last year. These results are primarily due to strong performance at Cummins Westport Inc. (“CWI”) and strong cash preservation, demonstrating Management’s commitment to implementing a flexible cost structure during oil price and economic headwinds.

“Global energy price volatility and the economic turbulence in many markets continues to put pressure on our global business units, but since natural gas prices generally have fallen in line with petroleum product prices, we continue to see good opportunities for natural gas vehicles in many markets. Since the acquisition of Prins in late 2014 we have also been expanding our offerings in the LPG market which continues to show promise in some regional markets” said David Demers, Westport’s CEO, “We also made steady progress on our HPDI product programs, including the completion of a major initiative with a new OEM partner, our fifth, to validate the unique performance and emissions characteristics of HPDI 2.0 on their own engine platforms.”

“Cash used and adjusted EBITDA results in the quarter were the strongest since our transition plan was announced in 2013. At -$7.7 million Adjusted EBITDA for the quarter and a $60.6 million cash balance, and with our current plans for non-core asset divestments, strategic initiatives, expected sales of new products, and continued cash discipline, we believe we have resources needed to complete our transition to positive adjusted EBITDA by mid-2016.”

Financial Outlook for 2015

Revenue for Westport Operations and Corporate & Technology Investments (“Westport Operations”) was $27.8 million for the quarter ended June 30, 2015 in line with 2015 expectations. Westport is reiterating its revenue outlook and expects consolidated revenue from these two segments to be between $110 million and $125 million for the year ended December 31, 2015. As in the past, we do not provide financial forecasts for our individual joint ventures.

Cash and Prioritization of Investments

  • As of June 30, 2015, Westport’s cash, cash equivalents, and short-term investments balance was $60.6 million. Cash used in operations, excluding changes in working capital, plus dividends received from joint ventures for the second quarter of 2015 was $8.1 million compared with $9.5 million for the first quarter of 2015 and $19.2 million for the second quarter of 2014, an improvement of 14.7% or $1.4 million and 57.8% or $11.1 million, respectively. Working capital changes consumed $3.9 million in cash in the quarter and $9.9 million in the six months ended June 30, 2015.
  • Westport reduced its combined operating expenses by $9.0 million for the quarter ended June 30, 2015 and by $22.0 million for the first six months in 2015, compared to the same periods last year, primarily due to prioritization of investment programs, cost discipline, as well as favourable impacts of foreign currency translation from the Canadian dollar and Euro to the US dollar equivalent.
  • Management believes that our cash balance, in combination with our actions around operational expenses and strategic initiatives, will be sufficient to carry the Company to positive consolidated adjusted EBITDA in mid-2016.
  • HPDI OEM development programs will be shifting from the design and development phase into the testing and validation phase by early 2016. Investments in Westport HPDI development programs are on track to deliver on our product revenue expectations. (Original Source)

In reaction to the earning release, shares of Westport Innovations are up 13.07% to $4.50 in after-hours trading. WPRT has a 1-year high of $17.84 and a 1-year low of $3.24. The stock’s 50-day moving average is $4.86 and its 200-day moving average is $4.76.

On the ratings front, Westport Innovations has been the subject of a number of recent research reports. In a report issued on May 11, Jefferies Co. analyst Laurence Alexander maintained a Hold rating on WPRT, with a price target of $6, which represents a potential upside of 39.9% from where the stock is currently trading. Separately, on May 8, Lake Street Capital’s Robert Brown upgraded the stock to Buy and has a price target of $9.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Laurence Alexander and Robert Brown have a total average return of 13.6% and 16.6% respectively. Alexander has a success rate of 63.5% and is ranked #93 out of 3718 analysts, while Brown has a success rate of 36.4% and is ranked #1196.

The street is mostly Neutral on WPRT stock. Out of 5 analysts who cover the stock, 4 suggest a Hold rating and one recommends to Buy the stock. The 12-month average price target assigned to the stock is $6.83, which implies an upside of 59.2% from current levels.

Westport Innovations Inc is a provider of high-performance, low-emission engine and fuel system technologies utilizing gaseous fuels.Its segments include On-Road Systems, Applied Technologies, and Corporate and Technology Investments.