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Westport (WPRT) Wins Contract to Supply LPG to a Key OEM

Westport Fuel Systems Inc. WPRT recently announced that it has been awarded a program to develop and supply liquefied petroleum gas (LPG) systems to a global original equipment manufacturer (OEM) to accommodate a number of its Euro 7 vehicle platform. The deal is anticipated to generate €40 million in annual revenues, and production is slated to begin in first-quarter 2025.

Driving alternative fuel technology adoption from light-duty to heavy-duty applications is a keystone of Westport’s OEM technology supply strategy. Earlier this year, Westport had won a €38 million contract to support the same OEM with LPG system solutions for its Euro 6 vehicle applications. Per the recent program, the company will supply the entire LPG system from the fuel tank to the fuel injectors for the OEM’s Euro 7 applications.

Westport is enthusiastic about the new contract. By supporting both Euro 6 and Euro 7 application requirements, it will ensure cleaner vehicles and improved air quality and make European communities more sustainable. WPRT’s market-leading solutions provide affordable, clean transportation that optimizes overall vehicle performance and efficiency.

LPG and bio-LPG are clean-burning alternative fuels used to power light, medium and heavy-duty vehicles. LPG-fueled vehicles are economical and low on emissions compared to vehicles using traditional fuels. Moreover, LPG-fueled vehicles are permitted to drive in emissions-restricted traffic zones in Europe. Therefore, LPG is fast gathering steam in markets like Europe, where refueling infrastructure is well established.

Seeking alternative fuel technology, ranging from light-duty to heavy-duty applications, has been a focus area of Westport’s OEM technology supply strategy.

Its portfolio of eco-friendly product mix is set to boost prospects amid climate change concerns. Westport HPDI 2.0 offers an environment-friendly robust performance for heavy-duty trucks, thereby positioning the company favorably as the transition to green transportation solutions intensifies. The company is taking great strides to develop the LPG ecosystem. The contract signed with NAFTAL in November 2021 to supply 60,000 liquefied petroleum gas systems through the 18 months from the starting period augurs well. Moreover, its acquisition of Stako, a leading manufacturer of LPG fuel storage systems in 2021 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 added to its top line. Collaborations with TUPY and AVL to develop highly efficient hydrogen internal combustion engines for heavy goods transportation also bode well.

WPRT’s independent aftermarket business is gaining from the continued price advantage of LPG in many of its markets, and the trend is likely to continue in the near-term, bolstering prospects. LPG, with a significant price advantage over petrol, contributes to Westport’s robust performance.

Shares of WPRT have lost 61.2% over a year compared with the industry’s 34.3% decline.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank & Key Picks

WPRT currently carries a Zacks Rank #3 (Hold).

Here are some better-ranked players in the auto space – CarParts.com PRTS, sporting a Zacks Rank #1 (Strong Buy), and Allison Transmission Holdings ALSN and Genuine Parts Company GPC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

CarParts has an expected earnings growth rate of 85% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 72.7% upward over the past 30 days.

Allison has an expected earnings growth rate of 26.1% for the current year. The Zacks Consensus Estimate for ALSN’s current-year earnings has remained constant in the past 30 days.

Genuine Parts has an expected earnings growth rate of 18.1% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

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Zacks Investment Research