The Whisper Number Impact: Earnings Preview For Intel, Microsoft, IBM, Google

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 |  Includes: AXP, FLEX, GOOG, IBM, INTC, MSFT
by: John Scherr

Expected earnings reports and the whisper number impact for January 19th, 2012, after market close.

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.

Intel (NASDAQ:INTC) reports earnings Jan. 19th, after market close. The whisper number is $0.61, in-line with the analysts estimate. Intel has a 57% positive surprise history (having topped the whisper in 28 of the 49 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these forty-nine earnings reports is -0.4%. The strongest price movement of +4.5% comes within thirty trading days when the company reports earnings that miss the whisper number (considered an "opposite" reaction). Last quarter the company reported earnings seven cents ahead of the whisper number. Following that report the stock realized a 4.0% gain in twenty trading days.

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Microsoft (NASDAQ:MSFT) reports earnings Jan. 19th, after market close. The whisper number is $0.80, four cents ahead of the analysts estimate. Microsoft has a 58% positive surprise history (having topped the whisper in 31 of the 53 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these fifty-three earnings reports is -2.1%. The strongest price movement of -2.8% comes within thirty trading days when the company reports earnings that beat the whisper number (considered an opposite reaction), and -3.8% within thirty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings three cents ahead of the whisper number. Following that report the stock realized a 6.9% loss in twenty trading days.

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IBM (NYSE:IBM) reports earnings Jan. 19th, after market close. The whisper number is $4.71, nine cents ahead of the analysts estimate. IBM has a 69% positive surprise history (having topped the whisper in 33 of the 48 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these forty-eight earnings reports is +0.4%. The strongest price movement of +1.5% comes within twenty trading days when the company reports earnings that beat the whisper number, and +2.7% within thirty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings one cent ahead of the whisper number. Following that report the stock realized a 6.1% gain in twenty trading days.

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Google (NASDAQ:GOOG) reports earnings Jan. 19th, after market close. The whisper number is $10.44, five cents behind the analysts estimate. Google has a 76% positive surprise history (having topped the whisper in 22 of the 29 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-nine earnings reports is -0.4%. The strongest price movement of -4.9% comes within thirty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings ninety-eight cents ahead of the whisper number. Following that report the stock realized a 1.6% gain in twenty trading days.

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Flextronics (NASDAQ:FLEX) reports earnings Jan. 19th, after market close. The whisper number is $0.24, four cents ahead of the analysts estimate. Flextronics has a 56% positive surprise history (having topped the whisper in 20 of the 36 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these thirty-six earnings reports is +1.4%. The strongest price movement of +3.9% comes within thirty trading days when the company reports earnings that beat the whisper number, and -5.2% within twenty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings in-line with the whisper number. Following that report the stock realized an 8.3% gain in five trading days.

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American Express (NYSE:AXP) reports earnings Jan. 19th, after market close. The whisper number is $0.99, three cents ahead of the analysts estimate. Amex has a 39% positive surprise history (having topped the whisper in 11 of the 28 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-eight earnings reports is +1.2%. The strongest price movement of -6.6% comes within thirty trading days when the company reports earnings that beat the whisper number, and +2.1% within twenty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings four cents ahead of the whisper number. Following that report the stock realized an 13.6% gain in ten trading days.

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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. 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.

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

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