Whisper Number Impact: Earnings Preview For Red Hat

Mar.27.13 | About: Red Hat, (RHT)

Red Hat (NYSE:RHT) is expected to report fiscal fourth-quarter earnings on Wednesday, March 27. The whisper number is $0.32, two cents ahead of analysts' estimate. RHT has a 60% positive surprise history, having topped the whisper number in 24 of the 40 earnings reports for which we have data.

Earnings History

  • Beat whisper: 24 quarters
  • Met whisper: 2 quarters
  • Missed whisper: 14 quarters

Our primary focus is on post-earnings price movement. Knowing how a stock's price will likely 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 table below indicates the average post-earnings price movement within a one- and 30-trading day time frame:

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The strongest price movement of +2.1% comes within 10 trading days when the company reports earnings that beat the whisper number, and -6.2% within 10 trading days when the company reports earnings that miss the whisper number. The average price reaction (to the whisper number) is consistent through 10 trading days when the company reports earnings.

The table below indicates the most recent earnings reports and short-term price reaction:

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In the comparable quarter last year, the company reported earnings one cent ahead of the whisper number. Following that report, the stock realized a 6.5% gain in five trading days. Last quarter the company reported earnings four cents ahead of the whisper number. Following that report, the stock realized a 5.1% gain in after-hours trading, but gave back 5.9% in five trading days. Historical data indicates the company to be a consistent price reactor through 10 trading days.

Enter your expectations and view more earnings information here, or let us know your expectations in the comments section below. 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 who 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.