Westport Fuel Systems Inc. (TSE:WPRT) Analysts Just Slashed This Year's Estimates

The latest analyst coverage could presage a bad day for Westport Fuel Systems Inc. (TSE:WPRT), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the current consensus from Westport Fuel Systems' six analysts is for revenues of US$325m in 2022 which - if met - would reflect a credible 3.9% increase on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analysts forecasting losses of US$0.19 per share in 2022. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$367m and losses of US$0.078 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Westport Fuel Systems

The consensus price target fell 18% to US$5.18, implicitly signalling that lower earnings per share are a leading indicator for Westport Fuel Systems' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Westport Fuel Systems analyst has a price target of US$8.00 per share, while the most pessimistic values it at US$7.00. Still, with such a tight range of estimates, it suggests the analysts have a pretty good idea of what they think the company is worth.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Westport Fuel Systems' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 3.9% growth on an annualised basis. This is compared to a historical growth rate of 6.9% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 23% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Westport Fuel Systems.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Westport Fuel Systems. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Westport Fuel Systems' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Westport Fuel Systems.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Westport Fuel Systems' business, like concerns around earnings quality. For more information, you can click here to discover this and the 3 other flags we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.