eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG), Southwest Air (NYSE:LUV), and Fifth Third Bancorp (NASDAQ:FITB) will be reporting earnings in the next few days. This is a look at the post earnings price movement expectations.
The whisper number is $0.47, in-line with the analysts estimates. eBay has exceeded the whisper number in 30 of the 46 earnings reports we have data. The company beat the whisper number last quarter, met the whisper in the two quarters prior to that, and topped the whisper a year ago. The average short term price reaction to these reports has been relatively neutral (+/- 1%). However, last quarter when eBay topped the whisper by nine cents the company saw a significant post earnings price move of +6.6% in five trading days. Longer term analysis of all earnings reports shows an average price move in thirty days following earnings of +6.5% when topping the whisper number, and +7.3% when falling short. Looking forward to next quarter, 85% of investors polled believe eBay will be providing a positive outlook, while only 15% are expecting a neutral outlook. eBay reports earnings January 19th, after market close.
The whisper number is $8.11, four cents ahead of the analysts estimates. Google has exceeded the whisper number in 19 of the 25 earnings reports we have data, including the past three out of four quarters. The company is well known for huge price moves (up and down) following their earnings reports - and all those major moves come in the after hours and pre-market trading. The average stock trader does not participate in the after hours trading market and has only a few choices. Either 'guesstimate' which way the stock will move and take a long or short position prior to the actual earnings being announced. Or wait until after the earnings are announced and take a position (during standard market hours). Neither option presents a confident strategy. 'Guessing' rarely works out, and the average price move during regular trading hours following earnings is +/- 1%. (Last quarter Google reported on 10/14 after market close. The stock opened trading on 10/15 at 599.30 and closed that day just 0.4% higher at 601.45. The stock closed just 2.1% higher five trading days later.) There are obviously better strategies out there (perhaps an option straddle), but understanding when Google's price moves around earnings is important. Google reports earnings January 20th, after market close.
Southwest Airlines (LUV):
The whisper number is $0.16, in-line with the analysts estimates. Southwest has exceeded the whisper number in 20 of the 31 earnings reports we have data. Last quarter the company topped the whisper number by a penny, saw a 1% loss in one trading day, but recovered within ten trading days showing a 4.2% gain. A longer term earnings analysis doesn't prove out to be as positive. The average price move is negative within thirty trading days no matter what they report, with an average loss of 2%. Southwest reports earnings January 20th, before market open.
Fifth Third Bancorp (FITB):
The whisper number is $0.24, in-line with the analysts estimates. FITB has exceeded the whisper number in 13 of the 25 earnings reports we have data, including the past four quarters. FITB has topped the whisper by an average of 12 cents in the last four quarters. Last quarter the company topped the whisper number by ten cents, saw a 4.8% gain in one trading day, and a 5.3% gain in five trading days. 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 +22% in fifteen trading days), and negative price movement when they miss the whisper number (on average -21.8% in fifteen trading days). FITB earnings January 20th, before market open.
Whisper numbers are the true earnings expectations from individual investors, floor traders, investment advisors, and market strategists. 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.