Wal-Mart (NYSE:WMT) is expected to report earnings on Thursday, May 16th. The whisper number is $1.16, one cent ahead of the analysts' estimate. Whispers range from a low of $1.12 to a high of $1.20. WMT has a 54% positive surprise history (having topped the whisper in 25 of the 46 earnings reports for which we have data).
- Beat whisper: 25 qtrs
- Met whisper: 1 qtrs
- Missed whisper: 20 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 table below indicates the average post earnings price movement within a one and thirty trading day timeframe:
The strongest price movement of -2.2% comes within thirty trading days when the company reports earnings that beat the whisper number, and -1.6% within twenty trading days when the company reports earnings that miss the whisper number. While the strongest price moves are negative, the overall average price move is as expected when the company reports earnings.
The table below indicates the most recent earnings reports and short-term price reaction:
In the comparable quarter last year the company reported earnings two cents ahead of the whisper number. Following that report the stock realized a 5.6% gain in five trading days. Last quarter the company reported earnings sixteen cents ahead of the whisper number. Following that report the stock realized a 6.8% gain in thirty trading days. Overall historical data indicates the company to be (on average) a negative price reactor through ten trading days, and an as expected price reactor from twenty to thirty trading days when the company reports earnings.
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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. Trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths.