UPDATE 2-Fuel Systems cautious on Europe outlook; shares fall

* Q3 EPS $0.29 vs $0.88 yr-ago

* Q3 rev down 26 pct

* Maintains 2010 rev view

* Shares fall more than 12 pct
(Adds CEO and analyst comments, share movement)

By Bijoy Koyitty

BANGALORE, Nov 4 (BestGrowthStock) – Fuel Systems Solutions Inc
(FSYS.O: ), which saw its quarterly earnings plunging on a
contraction in the European automotive markets, said it is
tough to provide an outlook on the market given uncertainties
surrounding it.

The company, which traditionally depended on Europe for a
sizeable portion of its revenue, has seen Italy — its key
market in Europe slowing down since the last two quarters,
after the government there decided to discontinue subsidies for
carmakers.

On a conference call with analysts, Chief Executive Mariano
Costamagna said new vehicle sales slowed down in large markets
such as Germany, Italy and France.

For the third quarter, revenues from BRC Operations,
primarily representing the company’s transportation business,
decreased 45 percent to $53.2 million.

“We do not expect any violent swings up and down … it is
difficult to give an outlook really as it relates to the fourth
quarter or 2011, given all the factors that would play there,”
Costamagna said.

In contrast, the CEO said, original equipment markets in
Asia and Latin America continued their strength in the quarter
and contributed to revenue diversification.

Fuel Systems, which makes components and systems that
control the pressure and flow of gaseous alternative fuels, is
slowly shifting its focus to the Asian and Latin American
markets where the auto industry is booming.

Fuel Systems entered India last year and signed up
customers in General Motors [GM.UL], Maruti Suzuki (MRTI.BO: )
and Tata Motors (TAMO.BO: ) (TTM.N: ).

LEGISLATIVE CHALLENGES

Fuel Systems is also seeing opportunities in its automotive
business in North America as companies including General Motors
plan to enter the compressed natural gas (CNG) space.

Late July, the U.S. Senate Democrats unveiled an energy
bill that offers over $4 billion in new incentives for the
adoption of natural gas vehicles. [ID:nN2797530]

ThinkEquity analyst Shawn Severson, however, said the
mid-term elections brought changes in the Congress, creating a
“kind of an uncertainty” on the fate of the proposed energy
bill.

“Probably it would take another couple of quarters to get a
good handle on the legislation,” Severson said.

CEO Costamagna said Fuel Systems is preparing for start of
GM production, which would possibly be towards the end of the
quarter.

“In the overall U.S. market, this is really the first
original equipment manufacturer contract, and depending on the
success, we expect others to follow,” the CEO said.

“This really could be a tipping point in natural gas in
transportation for the market,” he said.

For the third quarter, the company earned $5.2 million, or
29 cents a share, compared with $15.5 million, or 88 cents a
share, a year ago. [ID:nWNAB9755]

Shares of the company, which have gained 34 percent in the
last three months, were trading down 11 percent at $37.72 on
Nasdaq.
(Reporting by Bijoy Koyitty in Bangalore; Editing by Roshni
Menon, Jarshad Kakkrakandy)

UPDATE 2-Fuel Systems cautious on Europe outlook; shares fall