Why Westport Fuel Systems Inc Shares Plunged 28% in March

MarketsMotley Fool

What happened

Shares of natural gas transportation technology specialist Westport Fuel Systems Inc (NASDAQ: WPRT) fell 28% in March, according to data provided by S&P Global Market Intelligence, after the company reported fourth-quarter 2017 results. It wasn't that the company didn't improve financials that disappointed investors -- rather, it was the speed at which financials are improving that caused concern.

Continue Reading Below

So what

Quarterly revenue was up 6.8% to $64.2 million and loss from continuing operations fell by more than half to $19.2 million, or $0.14 per share. But the result fell $0.01 short of analysts' expectations, sending the stock south in the days after earnings.

Management said 2017 was a transformational year for Westport Fuel Systems, during which it broadened the product lineup and engaged more with original equipment manufacturers. But that hasn't translated into anything near a profitable business, and with the company making more cuts to research and development to lower operating expenses, investors should be concerned that future growth products are going to suffer from underinvestment.

Now what

The only guidance management gave for 2018 was that they expected Westport to turn adjusted EBITDA-positive during the second quarter of 2018 on the back of falling research and development expenses. That would be a good sign for the company, but we're not there yet, and investors have grown tired of waiting.

The longer it takes for natural gas vehicles to gain traction, the bigger threat electric vehicles become, and ultimately that's what worries me about Westport Fuel Systems in the long term. Now should be the time the company is demonstrating strong growth and profitability as natural gas fuel usage grows in semis, buses, and large trucks. Instead, buyers are putting down deposits for the Tesla Semi and buying electric buses from manufacturers like Proterra. If Westport Fuel Systems can't make money before these products build larger scale, what chance does it have when they do?

10 stocks we like better than Westport Fuel Systems Inc.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Westport Fuel Systems Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends TSLA. The Motley Fool has a disclosure policy.