3 reasons westport innovations inc. stock could soar

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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