I can't help smiling at fellow Fool Brian Stoffel's brilliant take on Westport Innovations
Winds are changing
Natural gas hasn't crept into a majority of vehicles yet, whether because of lack of popularity or a dearth of refueling stations. But things may be changing. Automakers are getting a little more comfortable with natural gas/gasoline hybrid vehicles, and oil giants are increasingly keeping natural gas fueling stations on their investment agendas.
For example, Chesapeake Energy's
Meanwhile, ConocoPhillips CEO James J. Mulva said a few months back that natural gas has become a major portion of his company's portfolio.
And then there's Westport, with its recent joint marketing agreement with Royal Dutch Shell
While both of these automakers already feature in competitor Fuel Systems Solutions' customer list, deals with Westport indicate how serious the auto giants are getting about natural gas. They certainly aren't shoving Westport aside.
Westport has also acquired Alternative Fuel Vehicle of Sweden AB, the sole supplier of natural gas fuel systems to Volvo. This move will extend Westport's technology to another big automaker and deepen its foothold in Europe. Expecting a quick integration, Westport thinks this acquisition should add approximately $1.5 million to its forthcoming quarter's revenues.
On top of all this, there's the NAT GAS Act -- which would add natural gas tax incentives -- remaining as a possibility. Things could turn even juicier for Westport.
On a roll
Although Westport's revenues grew an astounding 80% from the year-ago quarter to touch $81 million, its losses widened to $13.2 million from $6.2 million year on year, partially because operating expenses rose to $28.5 million compared with $16.7 million a year ago. But research and development are an important component of these expenses, with Westport increasing its R&D spending by 67% compared with last year's second quarter.
Westport's joint-venture business with Cummins
Westport's joint venture with China's largest heavy-duty engine maker, Weichai Power, is getting stronger as well, with 90% higher shipments in the second quarter compared with last year. Westport is also developing new technology to be used in Weichai's engine platform, which is expected to be rolled out next year.
The Foolish bottom line
I forgive Westport for maintaining the red ink on its books, because I believe its R&D investments will pave the way for future profits. And when you have billionaire George Soros increasing his investment in Westport, you know there's a lot brewing underneath.
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