2 Stocks That Just Raised the Bar

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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.

Stock

CAPS Rating (out of 5)

Prior or Consensus Estimate

Current Guidance

Period

Illumina (NAS: ILMN) ****$259 million$270 millionQ1 12
ReneSola (NYS: SOL) ***$178 million$180 million-$190 millionQ1 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.

Swiss miss
Shares of genetic analysis instrument maker Illumina were already buoyant on the takeover moves that Swiss pharmaceutical giant Roche is making. After first offering $44.50 a share, or $5.7 billion, for Illumina -- which was immediately rejected as too low -- Roche sweetened the deal by saying it would pay $51 a share, or $6.5 billion. After a little thought, management rejected that offer, too.

Illumina is the preeminent genomics and DNA sequencing technology leader. It dominates the market and says that 90% of all global sequencing output comes from Illumina machines. Its revenues have grown at a near 42% annual compounded rate over the past five years, compared with just 10% of the broad life-sciences peer group, including rivals Complete Genomics and Pacific BioSciences of California (NAS: PACB) , or the 23% growth generated by the molecular diagnostics industry that includes Sequenom (NAS: SQNM) and Myriad Genetics.

Maybe that's why it considers itself to be the "Apple of the genomics business." Apple's revenues have similarly grown at a 44% annual compounded rate over the past five years. And now with Illumina's customers placing orders that outpace deliveries for the third consecutive quarter, it's seeing no let-up in that meteoric rise and no need to sell itself cheap to Roche.

CAPS member CKRhea12 says the industry is transitioning from being reliant on government funding into clinical applications, which should be the next growth phase for it: "Although largely dependent on the research arena (heavily dependent on state funding) currently, genomic sequencing is beginning to make its way into the clinical setting and is being used by pharmaceuticals to help find biomakers for monoclonal antibody development. This transition will be slow progress at first but will quickly pick up as clinical applications are supported with [monoclonal antibodies] directed at specific biomarkers from the genotyping."

Tell us on the Illumina CAPS page whether you think management's right to reject the offer, and then add the genetic-equipment maker to your Watchlist to see whether this becomes a full-blown hostile takeover.

72 inches down
My father used to joke, "That graveyard's so popular people are dying to get in there." I view ReneSola's revenue forecast as something akin to whistling past the graveyard, because lately plenty of solar shops are dying to get in there.

As my Foolish colleague Travis Hoium recently noted, ReneSola's numbers are horrible, and increasing output of a money-losing product is a quick route to taking a dirt nap. Just ask Solyndra.

While it gained notoriety because of its political connections and the fact that taxpayers lost a half-billion dollars in it, the graveyard's filling up with lots of once-promising solar outfits. Solar Trust was just the latest victim despite the grandiose plans to build a solar farm in Blythe, Calif. Q-Cells, at one time the largest solar-cell maker, also delcared bankruptcy this month. Last year saw the demise of Evergreen Solar, Energy Conversion Devices, and Spectra Watt. In fact, there have been more than a dozen bankruptcies in the past year.

While ReneSola may have gotten a boost from the minuscule tariff the U.S. imposed on Chinese solar-panel imports, even those that might benefit most from the decision aren't a picture of health. JA Solar (NAS: JASO) , for example, just reported results that showed mounting losses and plummeting shipments, while Jinko Solar saw shipments drop even worse and turned in negative gross margins.

I rated ReneSola to underperform the markets on CAPS, and I'm maintaining that outlook today. Solar is not an industry I'd want to be putting my money into, because there are too many dark clouds hanging over it and the Grim Reaper is standing at the door.

But add the solar shop to the Fool's free portfolio tracker and tell us on the ReneSola CAPS page or in the comments section below whether the increased outlook also increases your interest or has you preparing a eulogy to recite at its funeral.

Raise your sights
These stocks may have raised expectations, but the smartphone revolution has even wider implications than before. The Motley Fool discovered three companies quietly cashing in on the smartphone and tablet PC boom. Read the free report "3 Hidden Winners of the iPhone, iPad, and Android Revolution," but hurry because its available only for a limited time.

At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Pacific Biosciences of California, Apple, and Illumina and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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