Published on 28 Mar 2024 on Zacks via Yahoo Finance

Here's Why You Should Retain Westport (WPRT) Stock for Now

Westport Fuel Systems Inc. WPRT is benefiting from its portfolio of eco-friendly products and cost-containment efforts. Elevated production costs, and rising general and administrative expenses are headwinds.Let us find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

Strong Product Portfolio & Cost Reduction to Aid Result

Westport’s portfolio of eco-friendly product mix is set to boost prospects amid climate change concerns. Its HPDI fuel system offers an environment-friendly and robust performance for heavy-duty trucks, thereby positioning the company favorably as the transition to green transportation solutions intensifies. The firm expects HPDI volumes to be a significant driver of revenues. Collaboration with Volvo to accelerate the commercialization and global adoption of Westport's HPDI fuel system technology for long-haul and off-road applications augurs well. The HPDI technology is poised to be a springboard of growth for the company.The acquisition of Stako, a leading manufacturer of LPG fuel storage systems, has enhanced WPRT’s ability to supply completely integrated fuel systems as well as its vision to transition to cleaner fuels, especially in emerging markets and also added to its top line.The Euro 6 and Euro 7 LPG programs are projected to generate nearly EUR255 million in revenues through 2028. Collaborations with TUPY and AVL to develop highly efficient hydrogen internal combustion engines for heavy goods transportation also bode well.Westport's venture into the locomotive sector through a two-year project to retrofit hydrogen-using HPDI technology has the potential to boost growth significantly. Efforts to streamline the portfolio also bode well. For instance, the company's strategic business reorganization in India, marked by the reduction of its stake in the joint venture Minda Westport Technologies Limited, not only brings an immediate financial benefit of approximately $3 million from the sale but also positions the company to enhance profitability and strengthen its balance sheet, with anticipated improvements in cash flows going forward.As part of its cost containment effort, the company has reduced its headcount in 2023. To achieve operational excellence, the company will continue to reduce its headcount in the future.The low debt level of the natural gas fuel tech company is another positive. Long-term debt decreased to $30.9 million at the end of fourth-quarter 2023 from $32.2 million as of Dec 31, 2022. Westport's total debt-to-capital ratio is pegged at 0.17, low both in absolute and relative terms. The company’s current ratio of 1.61 is higher than the auto sector’s 1.27, signifying solid liquidity levels.