General Motors (NYSE:GM) reported earnings before the market opened on Thursday. The company missed Wall Street profit estimates by 20 cents a share, and also fell short of the expectation from WhisperNumber.com by twenty cents. A GM earnings miss is a rare event as the company has topped the whisper number in 19 of the 27 earnings reports for which we have data, a 70% positive surprise history.
The company reported earnings of $1.2 billion in its international operations, which include Asia, for the full year, down by more than half from $2.5 billion the prior year. GM's international operations earned $200 million in the fourth quarter, down from $700 million in 2012. In pre-market trading this morning the stock dropped 4%. The next thirty days may just double those losses.
The following table shows GM's reported earnings per share over the past four quarters alongside the whisper number expectation from contributing investors and traders.
Our primary focus is on post earnings price movement. In other words, we look at what happens when the company beats or misses the whisper number expectation. This price movement analysis has been confirmed through our track record and by multiple independent academic studies that show whisper numbers provide greater returns when used as an investment vehicle, and have a greater impact on stock movement than analysts' consensus estimates.
The company has now reported earnings short of the whisper number in three of the past five quarters. In the comparable quarter last year, the company reported earnings four cents short of the whisper number. Following that report, the stock realized a 3.7% loss in five trading days. Last quarter, the company reported earnings one cent short of the whisper number. Following that report, the stock realized a 1.5% loss in ten trading days before turning and seeing an 8% gain in thirty trading days.
The table below indicates the average post earnings (intra-day) price movement for GM within a one and thirty trading day time frame:
The strongest price movement of -3.3% comes within twenty trading days when the company reports earnings that miss the whisper number. The overall average price move through thirty trading days is "negative" when the company reports earnings short of the whisper number. Based on the above data, and the company missing expectations, it's reasonable to believe that the stock will continue to see weakness (averaging a 3%) over the next twenty trading days from today's open.
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.