NEW YORK (AP) -- Shares of Echelon tumbled to 14-year lows Wednesday after the energy efficiency company's economic outlook left Wall Street disappointed.
THE SPARK: Echelon said late Tuesday that it expects an adjusted third-quarter loss of 6 to 12 cents per share and revenue of between $26 million to $30 million. Analysts polled by FactSet expect a loss of 8 cents per share on $37.9 million in revenue.
THE BIG PICTURE: Echelon is getting hit on numerous levels, though it actually beat most estimates for the most recent quarter. Systems sales, sales to utilities, fell from $29.3 million to $28.0 million. Revenue from sub-systems sales, largely to commercial clients, fell from $14.5 million, to $12.8 million. Included in the later are sales to a big client, Enel, an Italian energy company, which fell from $1.8 million, to $1.5 million.
THE ANALYSIS: At least two industry analysts cut their rating on Echelon from "buy" to "hold."
Jefferies & Co. analyst Jesse Pichel also slashed his price target in half to $4, saying that he doubts the company will be able to secure enough orders in time to give investors an idea of what to expect next year.
"While we favor Echelon's position long term as a hardware agnostic communications vendor to the smart grid space, macro related issues as well as the rolling over of large utility contracts will remain a near term headwind and we don't expect visibility to materialize until optimistically early 2013," Pichel wrote.
Cantor Fitzgerald analyst Dale Pfau cut his price target for the company to $3.50 from $5 in addition to his downgrade, noting that key production programs will begin to wind down during the third quarter.
"The company has been unable to convert its sales pipeline to production contracts that will mitigate the slowing revenues," Pfau wrote. "Meanwhile, we now believe that subsystem contracts in Brazil and China will not offer material revenues until the second half of 2013."
THE SHARES: Echelon Corp., based in San Jose, Calif., slid 59 cents to $2.90 in afternoon trading after hitting a low of $2.50. Shares last traded at that level in October, 1998.