Update: Westport Innovations Q2 '14 Earnings

| About: Westport Fuel (WPRT)


Westport reported Q214 earnings.

Investors should continue avoiding the stock.

Original article anticipated that investors wouldn't benefit from the increased demand for natural gas engines due to weak financials.

The quarterly earnings report for Westport Innovations (NASDAQ:WPRT) was generally mixed to negative despite the headline earnings figure beating estimates. The company reported a loss of $0.42 that beat estimates, but revenue of $40 million was far shy of the nearly $45 million estimate. Westport produced positive adjusted EBITDA of $1.0 million from operations, far ahead of guidance by year-end, but the overall sales from the joint ventures were negative leading to the very mixed numbers for the quarter.

One of the biggest complaints about Westport Innovations was the unsustainable high level of spending. The company needs to focus on the biggest opportunities and narrow spending. The Q214 report actually showed signs of that with a decrease of nearly $10 million in operating expenses mainly related to cutting research and development costs. On the flip side though, revenue numbers were disappointing all around. Both the Cummins Westport and Weichai Westport joint ventures saw revenue decline from the year-ago period.

My previous analysis suggested that Westport Innovations investors may not actually benefit from the technology leadership in natural gas engines. At the time, the stock was flying high after a decent Q114 earnings report. Investors are starting to see the light that the company's goals of positive adjusted EBITDA from operations still placed them with a loss of $27 million for the quarter. Even more concerning, sales at all company owned divisions and joint ventures are struggling at a time when the company needs rapid expansion in order to turn the losses around. Cutting research expenses is a necessary tool for meeting numbers, but the company needs revenue growth to remain viable.

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