The looming fiscal cliff continues to drag the Dow Jones Industrial Average (INDEX: ^DJI) down, as it tumbled another 121 points yesterday, or almost 1%, as we marched another day closer to the ledge.

Yet, as bad as things were on the day with the index, the three stocks below did even worse, plummeting by double-digit percentages. Now, don't go running over the cliff with them like a bunch of lemmings: it could just be a temporary situation. Let's first see whether they had good reason to fall, as panic-fueled routs can sometimes lead to excellent buying opportunities.

Company

% Change

Callon Petroleum (NYS: CPE)

(13.8%)

Fuel Systems Solutions (NAS: FSYS)

(12.7%)

Windstream (NAS: WIN)

(9.7%)

It's the economy, stupid
It wasn't presidential politics roiling the waters at Callon Petroleum but, rather, lower prices received for its oil and gas, combined with lower production that weighed on earnings. Oil revenues decreased 9% to $24.1 million in the third quarter, as prices fell 2% and production dropped 7% from the year ago period. Natural gas revenues were cut in half to $3.3 million, as prices and production plunged 31% respectively.


Although hurricanes played a role in the lower production levels, weak economics were responsible for the lower prices. The U.S. economy remains sickly, and China doesn't hold out much hope for a robust recovery, either. That partly explains the sharp drop in oil prices the day after the election. Crude oil plunged $4.27, or almost 5%, the biggest drop since last December, on fears that the country doesn't have the political will anymore to resolve the crisis.

For Callon, not only is it facing difficult economic times, but it's own financial house is a little suspect. It's been outspending its cash flow by a decent amount recently, and though it increased its borrowing base by $20 million, bringing it up to $80 million, it has less than $1.5 million in cash on hand. Being hemmed in by their lenders might not lead to the best outcomes, and investors should be wary of this oil producer.

Stalling out
After Westport Innovations (NAS: WPRT) lowered expectations for full-year revenues, because OEMs were cutting back inventories and customers were delaying purchases, it shouldn't have come as a surprise that industry peer Fuel Systems Solutions would also scale back its results and outlook. Despite long-term demographics that make the case for natural gas-powered vehicles an exciting proposition, the current state of affairs is less than robust.

Fuel Systems said revenues were flat on a constant currency basis, while net losses slightly widened, to $0.03 per share. The same OEM slowdown affecting Westport was playing the same role here, and it now expects revenues to be in the range of $380 million to $390 million, down from its previous guidance of $405 million to $420 million. Operating margins would be slashed from 3% to 5% down to 1% to 3%.

I still think nat gas vehicles are a more viable option than electric cars, which is why I've rated Westport to outperform the broad market averages on Motley Fool CAPS, and I'll be adding Fuel Systems, too, as the new lower price is attractive. Let me know in the comments box below when you think it will be driving profits higher.

Hanging up on growth
According to the FCC, 19 million Americans still have no access to high-speed Internet services, and three-quarters of them live in rural areas. That should be a growth driver for rural telecom provider Windstream; but only because it bought Paetec to help deliver fiber network and cloud computing capabilities to enterprise-level customers, was it able to see any growth this quarter. It's now missed analyst expectations for three straight quarters and, while it maintains that its dividend is sound, I still have trouble recommending it or its rivals Frontier Communications (NAS: FTR) and CenturyLink (NYS: CTL) .

All three are still overvalued, and my colleague Dan Radovsky has some serious reservations about Windstream's financial gymnastics. Until it straightens things out, I'd sit on the sidelines.

Ready for a resurrection

If you're on the lookout for some currently intriguing energy plays, check out The Motley Fool's 3 Stocks for $100 Oil. You can get free access to this special report by clicking here.

 

The article Weak Earnings Trump Fiscal Lunacy originally appeared on Fool.com.

Rich Duprey has no positions in the stocks mentioned above. The Motley Fool owns shares of Westport Innovations. Motley Fool newsletter services recommend Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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