It was a good-news, bad-news day for Westport Innovations (TSX:WPT) Tuesday, when the company's shares took a slide, along with its adjusted revenue projections, on the same day it announced a new deal with Indian engine maker Tata Motors.
In its 2012 financial outlook, the alternative fuel engine technology company had projected earnings of $400 million to $425 million. On Tuesday, the company announced it is adjusting those projections down to $340 million and $350 million.
The company blames the lower revenue projections on customers who are reducing inventory and delaying orders. Westport shares lost 14.43% of their value Tuesday, in response to the news, dropping from $28.27 to $24.19.
Some analysts had previously opined that Westport's stock was overvalued. In March, PI Financial Corp. analyst Jason Zandberg said an accurate valuation of the company's stock was $23 per share.
In a news release, Westport CEO David Demers gave assurances that the company is in solid financial shape, despite the lower anticipated revenue.
"We have a strong balance sheet and our asset-light business model allows us to remain competitively positioned," he said.
"To help mitigate further contraction in overall transportation markets, we expect a number of key product launches in our automotive, trucking and off-road applications in 2013."
Details of the Tata Motors deal are being kept under wraps. The deal would be for making light- and medium-duty engines for trucks and buses.
"Westport is developing a next generation engine technology for integration into a new engine platform with Tata Motors," said Nicholas Sonntag, executive vice-president for Westport.
"This is a great opportunity to work with India's largest engine manufacturer in a fast-growing marketplace demanding cost effective and environmentally conscious solutions. Our development schedule is accelerated and we believe it can be accomplished, given the substantive market size and interest in natural gas vehicles in India."
Westport develops the technology used to burn natural gas in internal combustion engines but does not make the engines itself. It forms agreements with engine manufacturers such as Cummins in the U.S. and Weichai in China to manufacture the engines.
