Fuel Systems (FSYS) is reaping the benefits of the global push for more environment-friendly sources of fuel. The company has reported 3 consecutive earnings surprise and estimates continue to climb.

Company Description

Fuel Systems Solutions Inc., through its subsidiaries, manufactures and markets systems that allow engines to operate cleaner. The company provides solutions that are more fuel efficient as well as alternative energy solutions. Fuel Systems has a global presence that is bring cleaner air and environmental solutions to every region of the world. The company is based in Santa Ana, California, employs 1,000 people, and has a market cap of $550 million.

Revenue Up 50%

Fuel Systems announced second-quarter results on Aug 7 including revenue of $98.3 million. Revenue was up 50% year-over-year from $65.6 million. Net income totaled $4.6 million Incorporatedluding a one-time charge of $3.9 million, compared to just $395,000 in the second quarter of 2007.

This produced earnings per share of 54 cents, smashing analyst estimates of 27 cents. The announcement was the third consecutive earnings surprise for the company.

Estimates Are Climbing

Since the Aug 7 announcement current year earnings have spiked 42% to $1.45 per share, up from $1.02. Current consensus estimates are projecting a 282% increase in annual earnings for full-year 2008.

Fuel Systems is also increasing its full-year 2008 guidance. The company expects its revenue to be $350 million, up from the original estimate of $320 million. It also forecasts gross profit margin to be 27%, up from 24%.

Dominating the Industry

Fuel Systems has a return on equity of 13.5%, easily trumping the industry average of 10.1%. The company’s net profit marking is 4.5%, almost 3 times higher than the industry norm of 1.7%. Fuel System has a minuscule debt to equity ration of 0.05.

The Chart

Shares of FSYS more than quadrupled before coming off of their highs set in August. The stock sold off sharply at the end of September and are currently resting on a support level just above $33 per share. While the sharp sell off is alarming, the stock could present a great value if the support holds.

Content Courtesy: Zacks Investment Research

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