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An earnings preview of financial sector companies reporting this week:

Citigroup (NYSE:C) (review):

The whisper number was $0.08, in-line with the analysts estimates. Earlier this week, Citigroup reported earnings of $0.04. This was not unexpected as Citigroup has fallen short of the whisper number in 20 of the 37 earnings reports we have data (basically a 50% hit/miss ratio). The past four quarters have not been much different - two quarters topping the whisper, one quarter falling short, one quarter in-line. It came as no surprise that the whisper for the current quarter is not more positive - last quarter they reported in line, and the quarter prior they topped by a penny. The price reaction following earnings has been inconsistent, but the overall short term average is negative. The average five day post earnings price move for the past four quarters is -3.3%. Citi opened trading Monday at 4.93 and is currently traing down about 1.2% (in line with our expectations).

Wells Fargo (NYSE:WFC):

The whisper number is $0.64, three cents ahead of the analysts estimates. Wells Fargo has fallen short of the whisper number in 15 of the 27 earnings reports we have data, but has topped expectations in five out of the past six quarters. Beat or miss expectations, within five trading days following their earnings reports the average price move is positive. But longer term tells a different story. The average price move within thirty trading days when topping the whisper number is +6.3%, miss the whisper and the average is -5.5%. Wells Fargo reports earnings January 19th, before market open.

Goldman Sachs (NYSE:GS):

The whisper number is $4.12, thirty-seven cents ahead of the analysts estimates. Goldman has exceeded the whisper number in 24 of the 32 earnings reports we have data. Goldman has topped the whisper number in four of the past six reports by an average of $1.73, but the average price move in five trading days following those same reports has been -3.3%. When they missed the whisper number last quarter, the stock moved 1.5% higher in five trading days. We consider Goldman a short term 'opposite' reactor - beat the whisper and see negative price movement, miss the whisper and see positive price movement. Goldman reports earnings January 19th, before market open.

State Street (NYSE:STT):

The whisper number is $0.90, five cents ahead of the analysts estimates. State Street has exceeded the whisper number in 18 of the 25 earnings reports we have data, including the past five out of six quarters. Last quarter the company topped the whisper number by four cents but the price reaction was limited to +1.3% in five trading days. While there have been a few strong 'price pops' following their earnings reports over the past few years (see July '10, April '09), on average the company tends to see a limited positive price move no matter what they report. State Street reports earnings January 19th, before market open.

US Bancorp (NYSE:USB):

The whisper number is $0.48, two cents ahead of the analysts estimates. US Bancorp has fallen short of the whisper number in 11 of the 23 earnings reports we have data. Over the past two quarters the company has fallen off investors radar as the company has been ignored (no whispers). This quarter's attention may be a sign that the stock is ready for a rebound. The whisper number indicates confidence, 80% of investors polled expect a positive outlook, and overall stats indicate a positive reaction no matter what they report (average +3% in five trading days). US Bancorp reports earnings January 19th, before market open.

PNC Bank (NYSE:PNC):

The whisper number is $1.39, one cent ahead of the analysts estimates. PNC has topped the whisper number in 14 of the 23 earnings reports we have data, including the past four quarters. PNC has on average exceeded the whisper number by 21 cents in the past four quarters. However, the average price reaction in five trading days following their last four earnings reports is -1.5%. But a longer term earnings analysis (last four years of earnings) shows the company tends to see positive price movement when they top the whisper number (on average +10% in fifteen trading days), and negative price movement when they miss the whisper number (on average -14.4% in fifteen trading days). PNC Bank reports earnings January 20th, before market open.

Bank of America (NYSE:BAC):

The whisper number is $0.25, eight cents ahead of the analysts estimates. Bank of America has exceeded the whisper number in 22 of the 39 earnings reports we have data, including the most recent three quarters. But the stock has seen (short term) negative price movement following each of the last three reports (averaging -7.8% in five trading days). While the whisper number appears to be showing some investor confidence, we don't believe that to be the case. Bank of America has topped the whisper by twelve cents on average in the most recent three quarters. If investors were truly confident about this earnings report, we would expect to see a whisper number between thirty-four or thirty-six cents. Bank of America reports earnings January 21st, before market open.

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

Source: Financial Sector Earnings Preview