Westport Innovations Inc. (TSX:WPT)(NASDAQ:WPRT), one of the world’s leading designers and manufacturers of advanced natural gas engines and vehicles, announced first-quarter earnings after the market closed on May 7, and its stock responded by rising over 5.5% in the trading session that followed. Even after this large pop, the company’s stock still sits more than 65% below its 52-week high, so let’s take a closer look at the results to determine if this could be the start of a sustained rally higher.
The results that ignited a rally
Here’s a summary of Westport’s first-quarter earnings results compared with its results in the same period a year ago. All figures are in U.S. dollars.
| Metric | Q1 2015 | Q1 2014 |
| Earnings Per Share | ($0.27) | ($0.38) |
| Revenue | $28.02 million | $39.93 million |
Source: Westport Innovations Inc.
In the first quarter of fiscal 2015 Westport reported a net loss of $17.2 million, or $0.27 per share, compared with a net loss of $23.9 million, or $0.38 per share, in the same quarter a year ago, as its revenue decreased 29.8% to $28.02 million.
The company noted that this very weak performance could be attributed to two primary factors. First, the weakening of the Euro against the U.S. dollar reduced its sales by $4.6 million. Second, lower oil prices led to lower petroleum-based fuel prices in the first quarter, which resulted in increased competition from gasoline-fueled vehicles.
Here’s a quick breakdown of six other notable statistics from the report compared with the year-ago period:
- Product revenues decreased 22.4% to $26.98 million
- Services and other revenues decreased 79.7% to $1.05 million
- Gross profit decreased 56.1% to $5.4 million
- Gross margin contracted 1,150 basis points to 19.3%
- Reported a consolidated operating loss of $21 million, compared with an operating loss of $27 million in the year-ago period
- Ended the quarter with $70.61 million in cash and cash equivalents, a decrease of 24.3% from the beginning of the quarter
Can the rally in Westport’s shares continue?
The first quarter was far from impressive for Westport, so I do not think the post-earnings rally in its stock was warranted at all. Furthermore, I do not think there is any reason to gamble on the stock, because there are much better investment opportunities in this industry and in other industries today.
