(Fuel Systems Solutions story updated for Tuesday trading, analyst outlook)

NEW YORK (

TheStreet

) -- Natural gas vehicle company

Fuel Systems Solutions

(FSYS)

is among the biggest decliners among clean energy stocks on Tuesday, continuing a selloff that began in Monday after-hours trading. The natural gas vehicle play lowered its full year guidance below the Street consensus, and announced a secondary offering of two million shares after the market closed on Monday.

Shares of Fuel Systems Solutions declined more than 7% on Tuesday afternoon with triple its average daily volume in play.

The lowering of full year guidance should not be a huge surprise to investors. The Street consensus was for $440 million. Fuel Systems Solutions said in lowering its guidance to $420 million to $430 million that it expects "fourth quarter 2010 revenue to reflect softer European automotive purchases consistent with near-term economic trends in the region partially offset by continued strength in the IMPCO business."

These were the same trends that caused shares to sell off after its most recent earnings report came up short. The previous full year guidance from Fuel Systems Solutions was $425 million to $450 million.

>>Clean Energy Losers: Westport, Fuel Systems

Fuel Systems Solutions third quarter earnings reflected a disastrous month for European auto sales in August, and stoked fears that the IMPCO business could pick up the slack in the short-term, but European auto sales needed to rebound sooner rather than later as well. Analysts had said at the time of the third quarter earnings that the industrial market IMPCO business is generally not as strong during holiday season.

Stifel analysts noted on Tuesday morning that the new Fuel Systems' guidance implies a 12% to 22% miss of its prior fourth-quarter revenue estimate of $93.8 million -- and, more importantly, means that the natural gas vehicle company is set to exit the back half of 2010 at an annual revenue run rate of well below $350 million.

"We were previously estimating 2011 revenue and EPS of $425.5 million/$1.73 vs. consensus of $449.8 million/$2.00, which we believed at the time was too aggressive. However, it now appears that in the absence of a significant acquisition our previously Street low estimates could prove to be aggressive," Stifel warned on Tuesday.

Stifel noted that Fuel Systems' performance rose alongside subsidies in Italy making natural gas vehicles a popular purchase. Yet with those subsidies being removed in 2010 -- an event that the market knew was coming, "both delayed OEM demand, and previously cannibalized aftermarket demand have been weaker than expectations."

The Stifel team is still bullish on the long-term story, but sees the short-term uncertainty weighing on Fuel Systems. "While the company is transitioning from a hyper-growth Italy centric story to a more diversified, secular and stable growth story, a positive in our opinion, near-term visibility into demand and growth is limited," Stifel analysts wrote on Tuesday.

Fuel Systems also became the second natural gas vehicle stock play to commence a secondary offering since the third quarter earnings, saying it would immediately commence an offering of 2 million shares and all proceeds would go to pay off Italian bank debt.

Sector peer

Westport Innovations

(WPRT) - Get Report

saw its shares slump in November after it announced a secondary offering. Westport also announced its offering after the market close, saw a limited selloff in after-hours trading, but a bigger decline the following day when the market opened.

Fuel Systems Solutions has 17.6 million shares outstanding. The secondary offering represents roughly 11% of shares.

-- Written by Eric Rosenbaum from New York.

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>>Clean Energy Losers: Westport, Fuel Systems