Throughout 2011 and into 2012, the high cost of oil-based fuels and the low cost of natural gas stoked excitement over several stocks designing vehicles that run on alternative energy. Among this crowd, two companies have really stood out — and ironically, they’ve taken opposite directions during the last year, providing a potential catch up period for the laggard.
With a focus on natural-gas engines for trucks, Westport Innovations Inc. (USA) (NASDAQ:WPRT) soared into the start of 2012. But the stock has spent the last 18 months losing 40% of its value. Conversely, Tesla Motors Inc (NASDAQ:TSLA) focused on building premium electric cars and had a more muted stock performance before its well-discussed 400% gain over the past 12 months. Now, the question is whether Westport Innovations Inc. (USA) (NASDAQ:WPRT) can reignite its previous excitement, and catch up to Tesla Motors Inc (NASDAQ:TSLA)’s gains.
Are investors fleeing Westport Innovations Inc. (USA) (NASDAQ:WPRT) ‘s stock just as the catalyst to own it hits production? Will the Cummins Inc. (NYSE:CMI) jointly developed engine reignite the growth that sent Westport’s stock soaring in 2011? As is the case with many new technology developments, the market gets way ahead of the concept before eventually capitulating, right as the catalyst for its shares’ rise actually hits the markets.
New Cummins engine
The regional-haul natural-gas trucking market has been idling for a few years while it awaited the much-anticipated Cummins Westport Innovations Inc. (USA) (NASDAQ:WPRT) ISX12 G 12-liter engine. The 400HP version of the engine operates exclusively on natural gas (compressed or liquefied) using a proprietary spark-ignited technology.The engine, based on the Cummins Inc. (NYSE:CMI) 1SX12 diesel platform, is just what the regional-haul trucking industry needs for highway use.
Ironically, the stock hit multi-month lows just as the engine hit production in August — an engine expected to boost sales for the Cummins Inc. (NYSE:CMI) Westport Innovations Inc. (USA) (NASDAQ:WPRT) JV. Clean Energy Fuels has consistently listed the engine as a necessary catalyst to boost demand for the fueling stations it’s building along the U.S. highway system.
Production of the new engine isn’t expected to reach a commercial run rate until the end of the year, but even before that ramp-up, the joint venture sold 38% more units year over year during the second quarter. Still, that only translates into 2,716 engines, which provides plenty of upside for Westport Innovations Inc. (USA) (NASDAQ:WPRT)‘s future growth. Right now, LNG engines are only listed as around 1% of its total sales.