First Solar and Sirius Just Raised the Bar

Offering earnings guidance above analyst expectations is obviously a bullish sign because, over time, earnings growth follows sales growth. 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.

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.

Unplugging the cable
Don’t let First Solar fool you: the big upgrade in guidance was less than it seems, and the 34% run up in its share price over the past week will melt away like Icarus's wings when he flew too close to the sun. Rather than upping guidance, an analyst at Maxim Group says First Solar actually cut it.

Even though it beat Wall Street EPS expectations by $0.74 in the first quarter, the world's biggest thin-film panel maker is getting ready to tumble once again. Maxim's Aaron Chew says that margins and operating expenses were hidden within an adjustment for stock-based compensation that could total as much as $40 million, or $0.45 per share. Rather than raising guidance by $0.20, it actually reduced it by $0.50! Coupled with a bunch of one-time items, the business is really deteriorating, and there's still a lot of risk to its revenue stream.

The Fool's Travis Hoium noted the disconnect between what First Solar reported, and the lower shipments and margins that Chinese solar shops like Trina Solar (NYSE: TSL) and Yingli Green Energy (NYSE: YGE) have said. It becomes apparent there was no magical elixir here; First Solar investors will likely end up getting burned.

I'll be maintaining my underperform rating for First Solar on CAPS, agreeing with pchop123 that investors should take the pop and run. Let me know in the comments section below if you think there are still bright days ahead.

A broad canvas
The gains in Sirius XM Radio are predicated on a more solid foundation as it added 622,000 subscribers, bringing its total to 22.9 million, a record for the satellite radio operator. They don't expect the gains to stop, either, and believe that the second half of 2012 will be similarly strong.

Sales jumped 13% in the quarter. Profits were helped by a $3 billion gain on taxes, but adjusted earnings rose 28%, and free cash flow rose 39%, to $230 million.

Shares of Sirius are up 21% in 2012, as Liberty Media (Nasdaq: LMCA) seeks to wrest control of the company. It owns more than 46% of the stock, and has petitioned the FCC for permission to take the wheel. Some analysts think it's merely a tax avoidance maneuver by Liberty's John Malone. Instead of outright selling his stock, which would incur a sizeable capital gains tax, he would cause a Reverse Morris Trust, which would split off Sirius as a separate entity -- and save him millions in taxes.

Regardless of whether Sirius remains free of Liberty's grasp, or is subsumed (and split off again) by Liberty Media, it's clear that the satellite radio company is looking at a stronger future. CAPS member zubopirate likes Liberty's catch-and-release plan, but you can share your views on how Sirius XM Radio will fare by sounding off in the comments box below.

Raise your sights
These stocks may have raised expectations, but a new premium report on Sirius XM Radio detailing the challenges and opportunities that await investors who are both long and short the dynamic media giant is available for the asking. A year of updates is also included with the report. Check it out now.