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 whether 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
|IPG Photonics (NAS: IPGP)||*****||$0.54||$0.54-$0.64||Q1 '12|
|Philip Morris International (NYS: PM)||*****||$5.17||$5.25-$5.35||FY '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.
Fiber optic laser maker IPG Photonics is witnessing growth momentum as chip companies and telecoms, particularly those in China, ramp up production and use the devices to precisely cut and weld their chips.
Sure, China's economy is slowing, and Europe on the edge of financial collapse, but the long-term trends still point to IPG's outperformance. Although fourth-quarter numbers came in just shy of expectations, the company was focused laser-like on the future.
Compare that to industrial laser maker Rofin-Sinar (NAS: RSTI) , which badly missed profit forecasts by $0.08 a share as the machine tool space and electronics faced weakening demand. Newport will report its earnings later this month, but with a focus on the solar power market, it just might benefit from the bump the sector got as a rush was made to meet deadlines for feed-in tariff cuts. But since it also specializes in electronics, results could be bumpy.
All that makes IPG arguably the best of the bunch, since as CAPS member leaderoftheback points out, it offers up "just steady performance that's outperforming the rest of the market." But you can put IPG Photonics on your watchlist to be alerted if it will singe analyst expectations next quarter, too.
Smoke 'em if you got 'em
Cigarettes are anything but a drag on portfolio performance as Philip Morris and Lorillard (NYS: LO) both reported strong earnings results. Yet although the Marlboro Man enjoyed a nice bump after its earnings report, it was Lorillard that lit a match under its stock after it raised its dividend 19%.
Philip Morris' results were helped along by strong growth in Asia, where it enjoyed double-digit volume increases in Indonesia, Japan, and Korea, and witnessed an increase in its market share for the fourth year in a row. Lorillard also saw share gains, suggesting Reynolds American and even Altria (NYS: MO) may have lost some ground domestically.
We're still feeling the effects of the recession, so CAPS member 3Fairfield thinks Philip Morris is one particular "sin stock" that will benefit from the old saw about alcohol, tobacco, and gambling stocks rising during hard times.
Recessionary times make sin stocks favorable. In addition PM has a growing presence globally. Stock is a little bit high now, but I think it will continue to go up.
Add Philip Morris to the Fool's free portfolio tracker and tell us on the Philip Morris CAPS page whether you think it will smoke analyst estimates again next quarter.
Raise your sights
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At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of IPG Photonics, Altria, Rofin-Sinar, and Philip Morris International. Motley Fool newsletter services have recommended buying shares of Rofin-Sinar, IPG Photonics, and Philip Morris International. 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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