No one knows a company better than those who run it. That's why investors will often watch for when insiders are buying company stock or companies are buying back their own shares. These can be bullish signs for a company.
Offering earnings guidance above analyst expectations is also a bullish sign, as over time earnings growth follows sales growth. When a company predicts greater sales profits, we expect its stock price to soon follow.
Sometimes, though, things don't work out as planned, so we'll pair up the increased 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.
CAPS Rating (out of 5)
Prior or Consensus Estimate
||**||$0.37||$0.46||Q4 11 EPS|
||****||$356 million||$362 million||Q4 11 revenue|
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.
Not selling out
Lost in the din of InterDigital ending the search for a buyer of its patent portfolio was the news that it would be reporting profits well ahead of expectations. It is big news that it was unable to sell its patents on the market, as it means there will be no easy monetization of its IP. At the same time, analysts also drastically scaled back what they expect from InterDigital for next quarter, slicing earnings forecasts in half.
Having generated nearly $3 billion from its patents, the wireless leader hoped it could entice Intel, Ericsson, or HTC into making a bid, and Microsoft and even Apple were reported to have checked out its wares. It's not so much for a company to have a patent; what's key is the quality of the patent. Analysts now question whether Kodak can monetize its portfolio even in bankruptcy because of low quality, and one analyst has gone on record saying the $12 billion portfolio Google
Analysts might not ascribe a similar adjective to InterDigital's patents, but being encumbered, the patents aren't as valuable as originally thought, either. At least not to a potential buyer. For InterDigital, they ought to be a strong crutch to lean on going forward. But you can put InterDigital on your watchlist to be alerted if someone reevaluates their value and comes riding to the rescue.
An unclear connection
With InterDigital, the market had such high hopes for the company; not so with Clearwire. So when its results beat estimates, shares soared. The 4G wireless network operator is expected to almost double its subscriber share count based on continued growth in smartphone usage, putting its high-speed wireless services front and center.
The cash infusion it got from Sprint
Highly rated CAPS All-Star EnigmaDude believes there has been a stream of good news for Clearwire lately, especially in a new agreement with China Mobile
Raise your sights
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Fool contributor Rich Duprey owns shares of Intel, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Intel, Microsoft, China Mobile, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Google, China Mobile, Apple, Intel, InterDigital, and Microsoft, as well as creating bull call spread positions on Microsoft and Apple. 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.