Date post: | 23-Jan-2018 |
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Economy & Finance |
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3 Reasons Westport Innovations
Inc. Stock Could Soar
Source: Westport Innovations
A bigger company in the making
#1 Growth
Westport is merging with Fuel Systems Solutions as it aims to
dominate the global alternative-fuel market. The combined company will be
known as Westport Fuel Systems.
Westport’s gains from the merger
Expand reach to 70 countriesBroaden its portfolio from heavy-
duty and high horsepower products to light and medium duty, and industrial and automotive applications
Annual savings of around $30 million by 2018
A larger customer baseWestport Fuel Systems will serve nearly every leading automotive and industrial company in the world.
*not all customers listed. Source: Westport’s Corporate Overview Presentation.
Major advantageThe merger should improve Westport’s balance sheet, as
Fuel Systems is a debt free and cash-flow positive company.
Recovering
oil prices
#2 Oil
Image credit: Marianne muegenburg cothern via Flickr
After hitting multi-year lows, crude oil has rallied
nearly 20% in the past month amidst supply cuts
and increased demand.
Recovering oil prices
Why it matters
Fleet operators consider the price differential between natural gas and diesel as a deciding factor to switch to natural-gas vehicles.
While lower oil prices erode the spread, higher oil makes Westport’s natural-gas offerings more attractive.
Investors can remain hopeful as the worst may be over for crude oil.
Lower costs and key launch
on track
#3 Savings and growth
Westport’s HPDI injector. Source: Company website
Westport partnered with Delphi Automotive to co-develop and
manufacture its second-generation high pressure direct injection, or
HPDI 2.0 technology, which is more advanced and cost effective.
A much-awaited launch
Westport is on track to providing HPDI 2.0 components to OEMs for testing by mid-2016. It is initially targeting Europe and China.
Westport is slashing costs and selling non-core assets to ensure it has sufficient cash to bring HPDI 2.0 manufacturing online. HPDI 2.0 injector. Source: Westport’s Corporate
Overview Presentation.
Focus on costs and cash
Westport reduced its operating expenses by 27% during the nine months ended September 30, 2015. That helped it lower its adjusted EBITDA losses by 57% year over year during the period.
Westport expects to raise nearly $50 million in the near term through sale of non-core assets.
The company is on track to turn consolidated positive adjusted EBITDA this year.
Foolish takeaway
Westport’s profitability could still be years away, but management’s focus on controlling costs and strengthening its balance sheet, commercialization of its
HPDI 2.0 technology, and aggressive growth initiatives like the merger
should help the company turn around.
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