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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" has actually been proven to have a greater impact on stock movement.

DuPont (DD) reports earnings Jan. 24th, before market open. The whisper number is $0.35, two cents ahead of the analysts estimate. DuPont has a 68% positive surprise history (having topped the whisper in 25 of the 37 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 37 earnings reports is +0.5%. The strongest price movement of +0.5% comes within 10 trading days when the company reports earnings that beat the whisper number, and -1.7% within 30 trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 13 cents ahead of the whisper number. Following that report the stock realized a 5.6% gain in 10 trading days.

Harley-Davidson (HOG) reports earnings Jan. 24th, before market open. The whisper number is $0.22, one cent behind the analysts estimate. HOG has a 70% positive surprise history (having topped the whisper in 28 of the 40 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 40 earnings reports is +0.8%. The strongest price movement of +0.4% comes within 10 trading days when the company reports earnings that beat the whisper number, and +3.9% within 10 trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings two cents ahead of the whisper number. Following that report the stock realized a 17.0% gain in 20 trading days.

McDonald's Corp. (MCD) reports earnings Jan. 24th, before market open. The whisper number is $1.33, four cents ahead of the analysts estimate. McDonald's has a 55% positive surprise history (having topped the whisper in 18 of the 33 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 33 earnings reports is +0.9%. The strongest price movement of +1.8% comes within 30 trading days when the company reports earnings that beat the whisper number, and +1.9% within 20 trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 6 cents short of the whisper number. Following that report the stock realized a 4.5% gain in 30 trading days.

Johnson & Johnson (JNJ) reports earnings Jan. 24th, before market open. The whisper number is $1.12, 2 cents ahead of the analysts estimate. JNJ has a 53% positive surprise history (having topped the whisper in 21 of the 40 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 40 earnings reports is -0.3%. The strongest price movement of +0.6% comes within 20 trading days when the company reports earnings that beat the whisper number, and -1.2% within five trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 8 cents ahead of the whisper number. Following that report the stock realized a 1.9% gain in 20 trading days.

Verizon Communications (VZ) reports earnings Jan. 24th, before market open. The whisper number is $0.54, one cent ahead of the analysts estimate. Verizon has a 57% positive surprise history (having topped the whisper in 17 of the 30 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 30 earnings reports is +0.1%. The strongest price movement of -3.1% comes within 30 trading days when the company reports earnings that beat the whisper number, and -1.4% within 20 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 a 3.1% gain in 30 trading days.

Also reporting before market open:
- Baker Hughes (BHI) whisper number is $1.34, two cents ahead of estimates
- Delta Air (DAL) whisper number is $0.32, five cents behind estimates

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.

Source: The Whisper Number Impact: Earnings Preview For MCD, JNJ, HOG, DD And VZ