Offering earnings guidance above analyst expectations is obviously a bullish sign, as over time earnings growth follows sales growth. And when a company predicts greater sales or profits, we expect its stock price to soon follow.
Sometimes things don't work out as planned, though, so we'll pair up the brighter outlook with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best and brightest stock pickers think a company's long-term potential is outstanding, coupled with the company's own improved sentiment, maybe then investors should take notice, too.
Here are two stocks that recently raised guidance.
Prior or Consensus Estimate
|Nuance Communications (Nasdaq: NUAN )||****||$0.38||$0.42-$0.43||Q2 12|
|NXP Semiconductors (Nasdaq: NXPI )||*****||$0.34||$0.38-$0.43||Q2 12|
Don't blindly buy into their heady outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.
Later this week speech recognition expert Nuance Communications will release its full earnings report, but that didn't stop it from trying to gain some legs ahead of time by issuing preliminary numbers at the end of April indicating revenues and profits would be coming in ahead of not only its own prior guidance but Wall Street's forecasts as well. The stock got a little pop from the announcement, but shares have resumed their slide once again, down 5.5% from the release date and 24% from their 52-week highs.
Despite doing its darnedest to roll up the industry under its roof by making acquisitions left and right, there's still significant competition out there that poses a real threat. Both Google and Microsoft have developed speech-recognition capabilities, and AT&T (NYSE: T ) is opening its technology to software engineers everywhere next month, a significant risk to Nuance's alliance with Apple (Nasdaq: AAPL ) .
Despite my stated misgivings about the communications specialist's acquisitive nature, CAPS member drjmac5 believes Nuance's Dragon software has yet to hit its stride, giving it plenty of room to run: "First (or early serious) mover and top dog advantages. Dragon has yet to capture its potential and the product steadily improves."
Tell us on the Nuance Communications CAPS page if you think as I do that it will choke on its spending spree as bigger, better-financed rivals enter the market, then add the stock to your watchlist to see whether this stock recognizes the dangers facing it.
Cutting to the heart of the matter
Near-field communications, or NFC, is a technology that allows communication over very short distances -- typically just a few centimeters. Using a smartphone, a user can touch the phone to an NFC tag and immediately be connected to a website, dial a phone number, or launch an app to show information such as business details or points of interest.
Barnes & Noble is trying to keep its Nook relevant by embedding NFC capabilities, according to Fortune magazine, giving readers the opportunity to get more information on a title simply by touching the e-reader to the book's cover. With Microsoft investing $300 million to combine B&N's digital and college divisions, there are huge possibilities for expansion.
While nothing is definitive, NXP Semiconductors is the leading NFC chip maker in what may prove to be a burgeoning industry. Yet because it's still in its relative infancy, there's a lot of jockeying for position in various niches. Identive Group makes NFC tags (and is collaborating with NXP), and chip maker Broadcom (Nasdaq: BRCM ) -- perhaps best known for its TV and set-top box chips -- is making a splash in NFC mobile payments.
And CAPS member rrtman49 is looking for NXP to get its share in the space as well, with its chips replacing credit cards "as more stores install a smart phone swipe devices that allows for charging purchases by swiping your smart phone instead of swiping the plastic credit card."
I agree with that assessment and previously rated the NFC specialist to outperform the market indexes, but you can add NXP to the Fool's free portfolio tracker and tell us on the NXP Semiconductors CAPS page or in the comments section below where you think we'll see NFC chips pop up next.
Raise your sights
These stocks may have raised expectations, but there's a new technological revolution with even wider implications than before, and the Motley Fool has discovered three companies ready to capitalize on the boom. Read the free report "The Future Is Made in America" to find out who these winners are, but hurry, because it's available only for a limited time.