The Whisper Number Impact: Earnings Preview For Oct. 28th

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by: WhisperNumber

Knowing how likely a stock's price will move following an earnings report will help you make better trades. Many investors believe that beating or missing the whisper number has the greatest impact on stock movement. If the number is exceeded, the stock is rewarded and prices move higher. If the number is missed, the stock is punished and prices move lower. Unlike the analysts' estimate, the "whisper number" from WhisperNumber.com has actually been proven to have a greater impact on stock movement.

Expected earnings reports and the whisper number impact for October 28th, 2011:

Merck (NYSE:MRK) reports earnings Oct. 28th, before market open. The whisper number is $0.92, one cent ahead of the analysts estimate. Merck has a 71% positive surprise history (having topped the whisper in 24 of the 34 earnings reports for which we have data). The average price movement within 10 trading days of these 34 earnings reports is -0.6%. The strongest price movement of -2.4% comes within 10 trading days when the company falls short of the whisper number.

Biogen Idec (NASDAQ:BIIB) reports earnings Oct. 28th, before market open. The whisper number is $1.50, 3 cents short of the analysts estimate. BIIB has a 55% positive surprise history (having topped the whisper in 23 of the 42 earnings reports for which we have data). The average price movement within 30 trading days of these 42 earnings reports is +2.2%. The strongest price movement of +2.9% comes within 30 trading days when the company tops the whisper number, and -4.9% within 20 trading days when the company falls short of the whisper number. Last quarter the company reported earnings four cents short of the whisper number.

Chevron (NYSE:CVX) reports earnings Oct. 28th, before market open. The whisper number is $3.36, eight cents short of the analysts estimate. CVX has a 45% positive surprise history (having topped the whisper in 9 of the 20 earnings reports for which we have data). The average price movement within 10 trading days of these 20 earnings reports is +0.2%. The average price movement within 10 trading days when topping the whisper number is +2.0%. Last quarter the company reported earnings 13 cents ahead of the whisper number.

Arch Coal (ACI) reports earnings Oct. 28th, before market open. The whisper number is $0.20, five cents ahead of the analysts estimate. ACI has a 29% positive surprise history (having topped the whisper in 5 of the 17 earnings reports for which we have data). The average price movement within 10 trading days of these 17 earnings reports is +1.1%. The average price movement within 10 trading days when topping the whisper number is +4.4%. Last quarter the company reported earnings 21 cents short of the whisper number.

Newmont Mining (NYSE:NEM) reports earnings Oct. 28th, before market open. The whisper number is $1.27, 3 cents ahead of the analysts estimate. Newmont has a 50% positive surprise history (having topped the whisper in 6 of the 12 earnings reports for which we have data). The average price movement within 10 trading days of these 12 earnings reports is -0.1%. The strongest price movement of +4.9% comes within 30 trading days when the company tops the whisper number, and -3.2% within 30 trading days when the company falls short of the whisper number.

Whirlpool (NYSE:WHR) reports earnings Oct. 28th, before market open. The whisper number is $2.75, in-line with the analysts estimate. Whirlpool has a 55% positive surprise history (having topped the whisper in 6 of the 11 earnings reports for which we have data). The average price movement within 10 trading days of these 11 earnings reports is +0.2%. The strongest price movement of +4.6% comes within 20 trading days when the company tops the whisper number, and -4.0% within 20 trading days when the company falls short of the whisper number.

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.

According to the Wall Street Journal, "the percentage of companies that have beaten expectations often is cited as a barometer of corporate profitability, an indicator of how well the economy as a whole is doing or a predictor of where the stock market is going. What goes unsaid, however, is that these positive surprises are becoming so common they are nearly universal. They are predetermined in a cynical tango-clinch between companies and the analysts who cover them. And there is no reliable evidence that the stock market as a whole will earn higher returns after periods with more positive surprises."

"In short, there isn't anything surprising about earnings surprises. They aren't the exception; they are the rule. "All the numbers are gamed at this point," says James A. Bianco, president of Bianco Research."

Whisper numbers provide the unbiased earnings expectation proven more significant than the analysts estimates.

All trading involves risk and the information presented is not intended to be a recommendation of any kind.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.