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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