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Here's Why You Should Retain Westport (WPRT) Stock for Now
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Westport Fuel System Inc’s (WPRT - Free Report) established distribution channels and a strong portfolio of eco-friendly product mix comprising HPDI technology are poised to drive profitability. However, high operating expenses and capex requirements related to HPDI products and the decarbonization of hydrogen fuels will likely hurt its margins.
Let us discuss the factors that highlight why investors should retain the stock.
Strong Demand for Eco-Friendly Products Favor WPRT
Westport designs low-emission natural gas fuel systems and components for the trucking industry. Its portfolio of eco-friendly product mix is set to boost prospects amid climate change concerns.
Westport’s HPDI fuel system for heavy-duty trucks offers an environment-friendly, robust performance, positioning the company favorably as the transition to green transportation solutions intensifies. The firm expects HPDI volumes to be a significant driver of profitability. The HPDI technology has the potential to propel the company’s growth.
Its strong technological and innovation capabilities, combined with its established distribution channels, should enable it to maintain a dominant position in the fuel systems industry.
WPRT is well-positioned to capitalize on the growing demand for hydrogen fuel systems in both Original Equipment Manufacturer (OEM) and Independent Aftermarket (IAM) markets. Westport’s Q1’23 revenues from OEM and IAM businesses rose 9% and 5%, respectively, year over year.
The company's promising prospects are driven by its focus on LPG solutions, supportive pricing, strong relationships with several automakers and its ability to address markets that require cleaner but affordable options.
Stako Buyout – a Strategic Fit
The acquisition of Stako, a leading manufacturer of LPG fuel storage systems, has enhanced Westport’s ability to supply completely integrated fuel systems and its vision to transition to cleaner fuels, especially in emerging markets and has also added to its top line. Collaborations with TUPY and AVL List GmbH to develop highly efficient hydrogen internal combustion engines for heavy goods transportation also bode well.
Low Debt Levels to Aid Growth
The natural gas fuel tech company’s low debt level is another positive. Long-term debt decreased to $29.9 million at the end of first-quarter 2023 from $32.2 million on Dec 31, 2022. Westport's total debt-to-capital ratio stands at 0.20, lower than the auto sector's 0.52. The company’s current ratio of 2.05 is higher than the sector’s 1.32, signifying solid liquidity levels.
High Costs and Low Production Remain Headwinds
Reduced vehicle production and manufacturing delays amid a shortage of semiconductor supply and soaring commodity prices are likely to crimp Westport’s margins. A tough labor market and logistical challenges add to the woes.
Operating expenses and capex requirements related to HPDI products and the decarbonization of hydrogen fuels have been consistently on the rise. The trend is likely to continue, which will keep denting margins. Unfavorable foreign currency translations are also likely to offset profits.
Mercedes-Benz develops, manufactures and sells passenger cars, including premium and luxury vehicles. The Zacks Consensus Estimate for MBGAF’s 2023 sales implies year-over-year growth of 6%.
BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries and mobile phone components. The Zacks Consensus Estimate for BYDDY’s 2023 sales calls for year-over-year growth of around 209.6%.
Wabash is one of the leading manufacturers of semi-trailers in North America. The Zacks Consensus Estimate for WNC’s 2023 sales and earnings indicates year-over-year growth of 12% and 19.7%, respectively.
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Here's Why You Should Retain Westport (WPRT) Stock for Now
Westport Fuel System Inc’s (WPRT - Free Report) established distribution channels and a strong portfolio of eco-friendly product mix comprising HPDI technology are poised to drive profitability. However, high operating expenses and capex requirements related to HPDI products and the decarbonization of hydrogen fuels will likely hurt its margins.
Let us discuss the factors that highlight why investors should retain the stock.
Strong Demand for Eco-Friendly Products Favor WPRT
Westport designs low-emission natural gas fuel systems and components for the trucking industry. Its portfolio of eco-friendly product mix is set to boost prospects amid climate change concerns.
Westport’s HPDI fuel system for heavy-duty trucks offers an environment-friendly, robust performance, positioning the company favorably as the transition to green transportation solutions intensifies. The firm expects HPDI volumes to be a significant driver of profitability. The HPDI technology has the potential to propel the company’s growth.
Its strong technological and innovation capabilities, combined with its established distribution channels, should enable it to maintain a dominant position in the fuel systems industry.
WPRT is well-positioned to capitalize on the growing demand for hydrogen fuel systems in both Original Equipment Manufacturer (OEM) and Independent Aftermarket (IAM) markets. Westport’s Q1’23 revenues from OEM and IAM businesses rose 9% and 5%, respectively, year over year.
The company's promising prospects are driven by its focus on LPG solutions, supportive pricing, strong relationships with several automakers and its ability to address markets that require cleaner but affordable options.
Stako Buyout – a Strategic Fit
The acquisition of Stako, a leading manufacturer of LPG fuel storage systems, has enhanced Westport’s ability to supply completely integrated fuel systems and its vision to transition to cleaner fuels, especially in emerging markets and has also added to its top line. Collaborations with TUPY and AVL List GmbH to develop highly efficient hydrogen internal combustion engines for heavy goods transportation also bode well.
Low Debt Levels to Aid Growth
The natural gas fuel tech company’s low debt level is another positive. Long-term debt decreased to $29.9 million at the end of first-quarter 2023 from $32.2 million on Dec 31, 2022. Westport's total debt-to-capital ratio stands at 0.20, lower than the auto sector's 0.52. The company’s current ratio of 2.05 is higher than the sector’s 1.32, signifying solid liquidity levels.
High Costs and Low Production Remain Headwinds
Reduced vehicle production and manufacturing delays amid a shortage of semiconductor supply and soaring commodity prices are likely to crimp Westport’s margins. A tough labor market and logistical challenges add to the woes.
Operating expenses and capex requirements related to HPDI products and the decarbonization of hydrogen fuels have been consistently on the rise. The trend is likely to continue, which will keep denting margins. Unfavorable foreign currency translations are also likely to offset profits.
Zacks Rank & Key Picks
WPRT currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the auto space are Mercedes-Benz Group AG , BYD Company Limited (BYDDY - Free Report) and Wabash National (WNC - Free Report) , all of which sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mercedes-Benz develops, manufactures and sells passenger cars, including premium and luxury vehicles. The Zacks Consensus Estimate for MBGAF’s 2023 sales implies year-over-year growth of 6%.
BYD is engaged in the research, development, manufacture and distribution of automobiles, secondary rechargeable batteries and mobile phone components. The Zacks Consensus Estimate for BYDDY’s 2023 sales calls for year-over-year growth of around 209.6%.
Wabash is one of the leading manufacturers of semi-trailers in North America. The Zacks Consensus Estimate for WNC’s 2023 sales and earnings indicates year-over-year growth of 12% and 19.7%, respectively.