3 Green Vehicle Stocks Poised to Accelerate

NEW YORK (TheStreet) -- Natural gas vehicle stock plays like Clean Energy Fuels(CLNE), Fuel Systems Solutions(FSYS) and Westport Innovations (WPRT) are getting a lot of play as energy politics takes up the issue of federal support for natural gas vehicles.

Or at least, the power brokers in Washington D.C. seemed to be taking up the issue of supporting the growth of natural gas vehicle fleets until last Friday. Senate Majority Leader Harry Reid (D-Nev.) had introduced quick-hit energy legislation, dubbed the oil-spill bill. It included a federal incentive to make the cost of natural gas fleet vehicles, like trucks and vans, comparable to convention vehicles, but it died almost as quickly as it was introduced, with Reid delaying the legislation until at least September. It was a short-term blow to companies like Clean Energy Fuels that had been championing the energy bill cause.

Natural gas vehicle companies, especially Clean Energy Fuels, were doing everything they could to keep the energy bill ball moving. Clean Energy Fuels had issued a press release when Reid introduced the oil spill bill lauding the decision. The natural gas non-profit lobby group, the American Clean Skies Foundation, for which Clean Energy CEO Andrew Littlefair serves as a director, took out a full page ad in the most recent issue of The New Yorker to press the issue. Landi Renzo(LR), the Italian natural gas vehicle market leader that set up shop in the U.S. this year, was speaking as if the energy bill had already passed on its recent earnings conference call.

It was all for naught, at least until September. Some political analysts think the September scenario is a rosy one, anyway, and that any energy bill before the mid-term elections will be a lame duck piece of legislation. In the end, the rush of excitement about the energy legislation, and the trading linked to it, was a D.C. downer for Clean Energy and its peer companies.

Clean Energy Fuels Outlook

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One long-time buy side investor in the natural gas vehicle space summed up the back-and-forth of the political process by saying, "Right now, there is a lot of concern about the elections, and very little clarity on whether an energy bill gets passed. I think it will eventually get passed, but when? Who knows?"

Dr. John Roy, an independent expert on the natural gas vehicle space, said he still thinks there is enough momentum for legislation to eventually pass, but the stocks may trade sideways or down during the rest of the summer as nothing happens in Washington.

Westport Innovations Outlook

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The political stall puts the focus squarely back on earnings season. Short of legislation to spur the sales of natural gas vehicles, are these stocks likely to shift down a gear? A short-term catalyst for these stocks is the issue, and short interest remains elevated in these names. Take Fuel Systems Solutions, as an example, with 55% short interest as a percentage of the company's float.

Fuel Systems Solutions Outlook

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A problem inherent in the political uncertainty for the natural gas vehicle stocks is a wait-and-see attitude from potential purchasers of natural gas vehicle fleets, like trucking and shipping companies. The argument runs that since everyone knows the federal support for natural gas vehicles will be coming at some point, potential buyers of natural gas trucks and vans will wait to make their purchases. Additionally, the natural gas vehicle stocks, particularly Clean Energy Fuels and Westport, that are dependent on the U.S. market growth, have traded with political volatility this year, as opposed to trading on fundamentals.

In light of the lack of political clarity, though, the focus turns to earnings season, already underway for the natural gas vehicle stocks. Clean Energy Fuels, which reports Aug. 9, has been the most closely linked to the energy bill, and its short-term outlook could have used the big push of the energy bill. Westport Innovations reported on Wednesday after the market close, and Fuel Systems Solutions reported on Thursday morning.

The following is a look ahead to the Clean Energy Fuels earnings next week, and a review of the breaking earning news this week in the natural gas vehicle sector.