Why Fuel Systems Solutions Shares Slumped

Why Fuel Systems Solutions Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Fuel Systems Solutions were getting gummed up today, finishing down 18% after reporting third-quarter earnings.

So what: The maker of alternative fuel components said revenue increased 8.9% to $97.6 million and earnings per share came in at $0.05. Both numbers matched estimates. What seemed to drive investors away was disappointing guidance. Management narrowed its full-year revenue outlook to the lower end of its previous range at $400 million-$420 million, while the consensus stood at $416 million as the company noted a slower global transportation market.

Now what: The drop in its revenue outlook doesn't seem like enough of a reason to prompt such a sell-off in shares, but alternative fuel providers have struggled of late. With little or no profit recently, Fuel Systems needs a breakthrough and lower sales won't do it. Expect analysts to drop their $0.16 EPS projection for the current quarter soon. Until the fog lifts from the alternative industry, I'd stay away.

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