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Ahead of the Bell: Guidewire Software

NEW YORK (AP) -- Guidewire Software slumped 5 percent before the opening bell Wednesday after it issued a weak outlook for the year.

Citigroup cut its ratings on company, which provides software to the insurance industry.

Executives said in a conference call late Tuesday that they expect to post an adjusted fiscal 2014 loss of between 20 and 24 cents per share. Revenue is expected to total between $328.5 million and $340.5 million.

That's well below what Wall Street Was looking for on both counts and shares slid $2.50 to $43.98 in premarket trading.

For the quarter ended July 31, Guidewire earned $12.1 million, or 19 cents per share, up from $3.5 million, or 6 cents per share, in the same quarter the year before. Excluding one-time items, the company said it posted an adjusted profit of 25 cents per share for the recent quarter.

Revenue jumped 43 percent to $96.9 million, as total license revenue jumped 70 percent to $49.1 million

Analysts, on average, expected a profit of 14 cents per share on $93.1 million in revenue, according to FactSet.

For the current quarter, the company projected an adjusted loss of 15 to 18 cents per share on $61.4 million to $63.4 million in revenue. Analysts expect $73.1 million in revenue.

Citi analyst Walter Pritchard said the weak fiscal guidance stems from expectations of lower service revenue and higher operating expenses.

Pritchard said that while the lower revenue isn't a cause for concern, the company's earnings guidance, which implies an increase in spending, could cause some investors to worry about its long-term profitability.

The analyst cut his ratings on Guidewire Software Inc. to "Sell" from "Neutral," but boosted his price target by $5 to $37.