UPDATE 2-Fuel Systems Q1 beats;shares fall on Italy demand worry

* Q1 EPS $1.59 vs est $0.91

* Reaffirms 2010 rev view $400 mln-$450 mln

* Says broadening international footprint

* Italy worry, Europe concerns push shares down
(Recasts; adds details, analysts’ comments, share movement)

By Megha Mandavia and Bijoy Koyitty

BANGALORE, May 6 (BestGrowthStock) – Fuel Systems Solutions Inc
(FSYS.O: ), a maker of alternative fuel components, posted strong
quarterly results and kept its 2010 revenue view, but its
shares fell as much as 8 percent on concerns of its key Italian
market losing steam.

In March, Fuel Systems had warned that Italy was unlikely to
repeat last year’s strong performance after its government
decided to discontinue subsidies for alternative fuel systems.
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The first-quarter results are attributable exclusively to
the carryover from the 2009 Italian subsidies, Shawn Severson,
an analyst with ThinkEquity LLC, said.

“People still don’t have any colour on how the second and
third and fourth quarter may shape up,” he said.

For the first quarter, the company earned $28.0 million, or
$1.59 a share, compared with $7.1 million, or 44 cents a share,
a year earlier.

Revenue more than doubled to $161.7 million, attributable
to delayed original equipment manufacturer (DOEM) installations
in the company’s transportation business, driven by the expired
2009 Italian incentive program.

Analysts on an average had expected earnings of 91 cents a
share, on revenue of $145.1 million, according to Thomson
Reuters I/B/E/S.

Fuel Systems, which makes components and systems that
control the pressure and flow of gaseous alternative fuels,
said the contribution to revenue from Italian markets has been
more than 60 percent.

EUROPE WEAKNESS

Analyst Severson said Fuel Systems has significant exposure
to the European markets, and the present weakness there was
also a growing concern for the company.

If sales return in Europe later this year, the company
would probably be at a lower margin with the original equipment
manufacturers becoming more price competitive, Severson said.

In a statement, Fuel Systems said it was broadening its
international footprint, while seeing “stronger trends” in its
industrial business.

“We don’t know what European purchases are going to look
like in future. And second thing is, if the euro is weak,
translating back to dollar is going to be less powerful,”
analyst John Roy from Janney Montgomery Scott LLC said.

The euro has slumped almost 5 percent against the dollar
this week and is down more than 11 percent year to date.
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Fuel Systems also reaffirmed its 2010 revenue outlook of
$400 million to $450 million, saying it currently had low
visibility with respect to DOEM installations. Analysts were
expecting revenue of $440.7 million.

Shares of the company were down 8 percent at $27.24 in
afternoon trade on Nasdaq. They touched a low of $27.19 earlier
in the session.

Investment

(Reporting by Megha Mandavia and Bijoy Koyitty in Bangalore;
Editing by Anne Pallivathuckal, Aradhana Aravindan)

UPDATE 2-Fuel Systems Q1 beats;shares fall on Italy demand worry