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Winnebago (NYSE:WGO) reports fiscal second quarter earnings on Thursday, March 17th, before market open. The whisper number is $0.03, one cent short of the analysts estimates. Winnebago has exceeded the whisper number in 11 of the 17 earnings reports we have data.

Trading on an earnings event requires an understanding of post earnings price movement, both after hours and intra-day. We'll take a look at the average post earnings price movement, when those moves occur, and if Winnebago presents an earnings trade opportunity.

Since Winnebago reports earnings before market open, it's important to look at regular hours trading price movement following their earnings release. The average price move during next available intra-day trading (market open to market close) for the past four quarters is -3.2%. Obviously a strong negative price move (this average loss was most influenced by the earnings report one year ago when the stock dropped 11.1%).

Longer term earnings analysis (last four years of earnings) shows the company tends to see (on average) positive price movement of +1.1% (intra-day) in one trading day following their earnings report, and -0.8% in five trading days. These present limited but inconsistent price moves.

Winnebago has topped the whisper number in the past four quarters by an average of 15 cents, but they lack a consistent price reaction within one to five trading days. Over the past four quarters, beat or miss expectations, within five trading days following their earnings reports the average price move is -4.4%. Over a thirty day trading period, however, the company does see greater consistency, and price moves are strong. The average price move in thirty trading days when beating the whisper number is +21%.

Other factors that may influence post earnings price movement;

The majority of investors polled are expecting the company to provide a neutral outlook:

  • Positive 28.6%
  • Neutral 42.8%
  • Negative 28.6%

Winnebago earnings have historically given investors a positive surprise as they have exceeded investor expectations more times than missed:

  • Beat whisper: 11 qtrs
  • Met whisper: 0 qtrs
  • Missed whisper: 6 qtrs

Summary: The whisper number is showing no investor confidence this quarter as it is one cent lower than the analysts estimates. The average price movement (either intra-day, long term, or short term analysis) is limited or negative, and inconsistent through five trading days. And while the company tends to top the whisper number, the price moves are still negative and limited. There is no confidence from investors for their next quarter's outlook. The only positive is a consistent and strong price move within thirty trading days when they report earnings that beat the whisper number. Data indicates that any post earnings long trade would be high risk/high reward. But for most, the negatives outweigh the positives and data indicates Winnebago does not present a viable short term trading opportunity.

When analyzing the data we collect, the most important aspects are how a company reacts to beating or missing the whisper number, the average post earnings price movement, and in what timeframe (see link in profile to receive alerts). Keep in mind that trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths.

A company's "reaction" to 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.

Companies that exceed both the whisper number (from WhisperNumber.com) and the analysts estimate see a 2.5 times greater positive post earnings price move than companies that only exceed the analysts estimate but miss the whisper.

The whisper number is derived from an average of individual investors, floor traders, investment advisors, and market strategists expectations regarding earnings for the most recent quarter.

Source: To Trade or Not to Trade: A Winnebago Earnings Preview