Stocks That Just Lowered the Boom

When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!

To help tell the difference, we pair up dour guidance news with the sentiments of the 180,000-member Motley Fool CAPS community. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.

Here are two stocks that have recently announced reduced guidance.

Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping-off point for additional research.

Hanging up on growth
The networking industry went through a particularly nasty downturn last year, but the major telecoms weren't done reining in their capital expenditure spending. Finisar's fiscal-fourth-quarter earnings indicated they were still sluggish about doling out money for new equipment and there's no end in sight.

That's the refrain we've heard from networking equipment operators all year long. Tellabs (Nasdaq: TLAB) blamed the telecoms for sitting on their hands to start the year off, while Juniper Networks followed up with similarly sluggish spending news. It's an interesting development, though, because Cisco (NYSE: CSCO), which is one of Finisar's biggest customers, had previously thanked Verizon for dumping a ton of cash on its high-end routers, but when it reported third-quarter earnings in May, CEO John Chambers noted the macro trends in Europe were disconcerting, to say the least. Cisco's shares are now down 20% from its spring highs.

 Yet as Fool blogger Harsh Chauhan suggests, we're in the midst of a data boom -- bubble? -- and the cyclical telecom industry will cycle back to growth, and will do it soon. "This slowdown is merely a passing phase and as telecom companies get more aggressive on 4G rollout, Finisar will be well placed to record significant gains," wrote Harsh.

Underscoring the circular nature of Finisar's business, highly rated CAPS All-Star TSIF notes it's "clearly in a trough and riding strong and eventually higher. Not sure it's a long term hold if it cycles back up, it needs to hold and pull market share and get the margins more stable, but I'll determine that when the wave catches it."

I'm not ready to hang 10 just yet with Finisar, and would prefer to wait for a clearer signal from Cisco or the telecoms that spending won't be so tight. But tell me in the comments section below or on the Finisar CAPS page if I'm unnecessarily hanging up on growth, then add Finisar to the Fool's personalized stock-tracking service to be updated on when it starts ringing the register again.

Driving in reverse
Like trying to drive with the emergency brake on, trucking giant Navistar has been spinning its wheels trying to gain compliance with onerous EPA air regulations. Its emissions technology is different than that used by rivals like PACCAR and OshKosh (NYSE: OSK) (Navistar is the only trucker using it), and it couldn't pass tough, new rules issued by the regulatory agency two years ago.

Until now, it had been using pollution credits to keep its trucks on the road, but sales have been falling, as buyers were leery of purchasing what were essentially noncompliant trucks. It's also running out of credits, so it's likely going to have to switch to the alternate technology. Problem is, such technology changes don't happen quickly and it's more expensive than what Navistar was using previously.

Fitch Ratings looks askance at Navistar's situation, seeing increasing risk as sales and market share slide. The trucking outfit's credit rating was dropped, and if it doesn't get the emissions problems fixed in a hurry there could be further downgrades, which would lead to higher borrowing costs for the trucker.

Shares of Navistar have been cut in half, which created a big enough incentive for billionaire investor Carl Icahn to raise his stake in the company to 12%, spurring speculation the company might be sold. He's previously expressed his desire to see it sold to OshKosh. In response, Navistar adopted a poison-pill defense, which doesn't sit well with CAPS member eksummers620, who sees a management team more interested in saving "their jobs; not as a way to protect shareholders."

Add the trucker to the Fool's free portfolio tracker and tell me in the comments section below if you think Icahn will be persuasive in his dealings with management to effect a change in direction.

Looking under rocks
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