KB Home (NYSE:KBH) is expected to report earnings on Thursday, June 27th. The whisper number is -$0.03, four cents ahead of the analysts' estimate. Whispers range from a low of -$0.06 to a high of $0.01. KBH has a 65% positive surprise history (having topped the whisper in 24 of the 13 earnings reports for which we have data).
- Beat whisper: 24 qtrs
- Met whisper: 0 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 table below indicates the average post earnings price movement within a one and thirty trading day time frame:
The strongest price movement of -1.8% comes within ten trading days when the company reports earnings that beat the whisper number, and -5.9% within ten trading days when the company reports earnings that miss the whisper number. The overall average price move is negative (beat the whisper and see weakness, miss and see weakness) 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 nine cents short of the whisper number. Following that report the stock realized a 12.3% gain in five trading days. During the two quarters that followed, KBH topped the whisper number but the average price move was a loss of 6.7% in five trading days. Last quarter the company did not have a whisper number. Overall historical data indicates the company to be (on average) a negative price reactor 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 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.