Toll Brothers (NYSE:TOL) is expected to report earnings on Wednesday, May 22nd. The whisper number is $0.10, three cents ahead of the analysts' estimate. TOL has a 62% positive surprise history (having topped the whisper in 16 of the 26 earnings reports for which we have data).
- Beat whisper: 16 qtrs
- Met whisper: 0 qtrs
- Missed whisper: 10 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 +1.2% comes within five trading days when the company reports earnings that beat the whisper number, and -2.7% within five trading days when the company reports earnings that miss the whisper number. While the strongest price moves are as expected, the overall average price move is negative when the company reports earnings that beat the whisper number from ten to thirty trading days.
The table below indicates the most recent earnings reports and short-term price reaction:
In the comparable quarter last year the company reported earnings six cents ahead of the whisper number. Following that report the stock realized a 5.2% gain in five trading days. Last quarter the company reported earnings nine cents short of the whisper number. Following that report the stock realized a 7.5% loss in five trading days. Overall historical data indicates the company to be (on average) an as expected price reactor (beat the whisper and see strength, miss and see weakness) when the company reports earnings, with the exception of beating the whisper number and seeing weakness from ten to thirty trading days.
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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.
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.