Why Shares of Westport Fuel Systems Surged Today

What happened

Shares of Westport Fuel Systems (NASDAQ: WPRT) climbed 16% on Friday morning after the manufacturer of clean fuel systems reported first-quarter results that came in ahead of expectations, and won an analyst upgrade as a result.

So what

On Thursday evening, Westport, which is focused on technology that allows trucks to run on natural gas, reported a first-quarter loss from continuing operations of $0.02 per share on revenue of $73.2 million, beating analyst expectations for a $0.04 per share loss on sales of $65.4 million. Transportation revenue was up 15% year over year and up 21% from the fourth quarter.

A hand draws a climbing stock chart.

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CEO David M. Johnson said the company's products are gaining traction as large transport users try to comply with regulations limiting emissions.

"Our diversity of commercially available products applicable to the full range of transportation applications and available in markets around the world are the key to our improving results," Johnson said. "Favorable macro-economic factors and stricter emissions regulations are driving OEM and consumer demand for our market-ready alternative fuel technologies."

The results prompted Lake Street analyst Robert Brown to upgrade shares to buy from hold. The analyst said that the strength of the quarter helps give him confidence that Westport's management transition has gone smoothly, and that the company is gaining a foothold in its key markets.

Now what

With the Friday jump, shares of Westport are now up nearly 50% year to date, but the stock still has a way to go to get back to levels hit last September after it announced a deal that was supposed to ease the company's expansion into China.

WPRT data by YCharts.

Commercial launch of Westport's HPDI 2.0 national gas technology in China is expected this year, which the company said should drive volume growth and help it reduce costs and improve margins.

Westport is moving in the right direction, but it is going to have to make good on the potential it sees in China for the momentum to continue. Investors will be watching the next few quarterly reports carefully.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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