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  • Goldman Sachs does not share the positive investor reaction to Westport Innovations' (WPRT +2.5%) Q4 results, reiterating its Sell rating as profitability is limited by high distribution support requirements and the Cummins JV that accounts for nearly all WPRT's medium-term profits and cash flow is scheduled to end in 2021 with a buy-out option at 1.3x EBIT in 2019.  [View news story]
    I personally don't care what WPRT and Cummins are doing in 2019. We all might be melted together from nuclear fallout by then. What I do care about is the profit to be made off of the soon-to-be explosive growth in the natural gas market. Although it might end up being more prevalent in our country due to our attitude regarding foreign oil dependency and our abundant supply, this is a shift worldwide. We have enough supply to sustain our country for 100 plus years.

    WPRT is poised as the front-runner for all nat gas moving forward. For those that listened to the conference call and saw the reports, I see how it would be easy to get mixed signals on the future profits of the company. There is substantial value though. Just one market they are touching is the class 8 tractor market. They mentioned a conservative estimate that 7-15% of the OTR trucks will be nat gas before 2017. I believe 15% or higher is very realistic. This market is bigger than most give it credit for. If you are wearing a shirt, driving a car, or eating your lunch it all came on a truck. Virtually everything comes on a truck.

    In the call it is mentioned that WPRT is shifting directions from concept to production. This is what we all have been waiting for. Great ideas and now its time to make money. What they neglected to mention is that the Cummins Westport ISX 12g nat gas engine is currently available in a 350hp package. With 400hp package available as soon as June. There are standing orders for these engines even though the fuel infrastructure is not complete. They will not produce enough engines in 2013 to even scratch the surface of demand.

    Clearly for most businesses these are not the most profitable times so it would make sense to question why they would spend additional money on new equipment. When ROI comes into play on ground level for a freight company here is a very simple way to understand why they will leverage assets to get this product. Beside the obvious unpredictable fixed costs of the present, a company that runs 100,000 miles a year on their equipment will have a payback of additional cost in about 14 months from fuel savings. Considering average life cycle of 5-6 yrs, if they run their trucks for another 4 years the will save on average $35,000 a year in fuel cost. Thats $140,000 fuel savings in just over five years, on one truck!!! Try 50 or 100.

    This new nat gas tech also allows trucks to run with no exhaust aftertreatment at all! This aftertreatment system is a expensive nightmare for many fleet companies. It is a requirement to meet air quality standards for diesel trucks, but not on a nat gas truck because they burn so much cleaner. Also they only produce the noise of a passenger car while running!

    Being that this only represents part of their business I still believe this is a good play long, but as mentioned maybe not too long.

    Mar 8, 2013. 04:06 PM | 3 Likes Like |Link to Comment
  • This morning's spike in shares of Westport Innovations (WPRT +7.6%) on takeover speculation gains momentum into the close. Chatter centers around potential interest from Cummins (CMI +0.3%), already involved in a JV that accounts for much of WPRT's medium-term profits.  [View news story]
    The Westport-Cummins partnership is introducing the first CNG/LNG engines capable of class 8 linehaul applications. This is also without any form of aftertreatment system necessary. This will revolutionize the trucking business which affects all of us as consumers at the bottom line price of any product we buy. It is predicted that by year 2017 35- percent of class 8 tractors will run natural gas. These type of numbers are not to be taken lightly. That is a huge change in a very short time frame and Westport Innovations is at the forefront of this technology. Whoever owns them will be poised to take the profits.
    Feb 17, 2013. 04:14 AM | Likes Like |Link to Comment
  • Netflix (NFLX) prices its $500M offering of senior notes due 2021 with a 5.375% coupon rate. Some analysts on the Street are issuing cautious comments on Netflix's cash flow situation due to the bond play as the company's content costs continue to increase.  [View news story]
    The costs for content are going up...
    Jan 30, 2013. 10:19 AM | Likes Like |Link to Comment