Whisper Number Impact: Earnings Preview For Cisco

May.15.13 | About: Cisco Systems, (CSCO)

Cisco (NASDAQ:CSCO) is expected to report earnings after the close on Wednesday, May 15. The whisper number is $0.50, one cent ahead of analysts' estimates. CSCO has a 57% positive surprise history, having topped the whisper number in 32 of the 56 earnings reports for which we have data.

Earnings History

  • Beat whisper: 32 quarters
  • Met whisper: 2 quarters
  • Missed whisper: 22 quarters

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 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 +1.5% comes within 30 trading days when the company reports earnings that beat the whisper number, and -1.5% within five trading days when the company reports earnings that miss the whisper number. While the strongest price moves are as expected, there is negative price movement through 10 trading days when the when the company reports earnings that beat the whisper number.

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 in line with the whisper number. Following that report the stock realized an 8.6% loss in after-hours trading, and dropped an additional 3.0% in five trading days. Last quarter, the company reported earnings in line with the whisper number. Following that report the stock realized a 1.2% loss in after-hours trading, but turned around with a 4.6% gain in 20 trading days. Overall historical data indicates the company to be (on average) a negative price reactor through 10 trading days, and an as expected price reactor from 20 to 30 trading days when the company reports earnings.

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. Trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths.

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.