Needham is out with a call following Fuel System Solutions (FSYS) earnings and is maintaining its Buy rating but is slashing the price target from $55 to $35.

Hat tip to Street Insider for the following analyst comment:

“FSYS reported a blowout Q4 with both rev and EPS well ahead of earlier estimates but in-line with pre-announcement. Stronger rev. led by higher growth in the transportation segment (up 95% y-o-y), mainly from the Italian market. With greater volumes, gross margins were above expectations, coming in at 34.3% vs. our estimate of 33%. This led to the upside in EPS
of $1.12. Even with the elimination of the Italian subsidy program, Q1/10 volumes appear strong due to orders placed last year. However we expect business to fall off in subsequent quarters as the revenue model has to be reset to eliminate the favorable impact of the subsidy program. Also, the industrial business (16% of 2009 rev.) has been penalized by the recession and we expect only modest growth going forward. Given the reduced outlook and lower margin assumptions, we have revised our EPS est. down to $2.05 and our price target to $35. We have instituted a 2011 estimate for top line growth of 14% and EPS of $2.45. With weak 2H y-o-y comparisons the stock could remain range bound over the near term, awaiting better clarification on world wide growth opportunities.”

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