Home Depot (NYSE:HD) is expected to report fiscal fourth quarter earnings on Tuesday, February 26th. The whisper number is $0.64, in-line with the analysts' estimate. HD has a 69% positive surprise history (having topped the whisper in 36 of the 52 earnings reports for which we have data).
- Beat whisper: 36 qtrs
- Met whisper: 3 qtrs
- Missed whisper: 13 qtrs
Our primary focus is on post earnings price movement. Knowing how likely a stock's price will move following an earnings report can help you determine the best action to take (long or short). In other words, we look at what happens when the company beats or misses the whisper number expectation.
The strongest price movement of -4.2% comes within thirty trading days when the company reports earnings that beat the whisper number, and +2.5% within twenty trading days when the company reports earnings that miss the whisper number. However, don't overlook the inconsistent short term price movement when they beat or miss the whisper.
The post earnings price movement within one trading day has been positive in three of the four most recent quarters. It did not matter if the company beat or missed the whisper number. In the comparable quarter last year, the company reported earnings seven cents ahead of the whisper number. Following that report, the stock realized a 2.4% loss in five trading days (again seeing an opposite short term price reaction). Last quarter the company reported earnings in-line with the whisper number. Following that report, the stock realized a 3.0% gain in fifteen trading days, before turning and seeing a 1.9% loss in thirty trading days. Based on historical price movement averages we would label the company an opposite post earnings price reactor for short term periods.
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Since 1998, WhisperNumber.com has been tracking and publishing "crowd sourced estimates" for earnings. We call these earnings expectations whisper numbers. Our whisper numbers are gained from individual investors and traders just like you that have registered with our site. While the whisper number itself is an important part of our analysis, a company's "price reaction" to beating or missing the whisper number expectation is the key. On average, companies that exceed the whisper are "rewarded," while companies that miss are "punished" following an earnings report.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.