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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 analyst estimates, the "whisper number" has actually been proven to have a greater impact on stock movement.

Aetna (AET) reports earnings Feb. 1st, before market open. The whisper number is $0.96, two cents short of analyst estimates. Aetna has a 70% positive surprise history (having topped the whisper in 16 of the 23 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 23 earnings reports is +0.2%. The strongest price movement of +3.3% comes within 30 trading days when the company reports earnings that beat the whisper number, and +5.3% within 20 trading days when the company reports earnings that miss the whisper number.

Whirlpool (WHR) reports earnings Feb. 1st, before market open. The whisper number is $1.78, 15 cents short of analyst estimates. Whirlpool has a 50% positive surprise history (having topped the whisper in six of the 12 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 12 earnings reports is +0.3%. The strongest price movement of +4.6% comes within 20 trading days when the company reports earnings that beat the whisper number, and -3.4% within 20 trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 48 cents short of the whisper number. Following that report the stock realized a 8.3% gain in 10 trading days, only to give it all back with a 3.8% loss in 30 trading days.

AOL (AOL) reports earnings Feb. 1st, before market open. The whisper number is $0.16, in-line with analyst estimates. AOL has a 67% positive surprise history (having topped the whisper in two of the three earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these three earnings reports is -3.5%. The strongest price movement of -13.7% comes within 30 trading days when the company reports earnings that beat the whisper number, and -12.7% within five trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 5 cents ahead of the whisper number. Following that report the stock realized a 9.2% gain in five trading days.

Hershey (HSY) reports earnings Feb. 1st, before market open. The whisper number is $0.69, one cent short of the analysts estimate. Hershey has a 43% positive surprise history (having topped the whisper in 10 of the 23 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 23 earnings reports is +1.2%. The strongest price movement of +3.4% comes within 30 trading days when the company reports earnings that beat the whisper number, and +2.5% within 30 trading days when the company reports earnings that miss the whisper number.

Reporting after market close:

  • BMC Software (BMC): whisper number of 0.87, five cents ahead of the analysts
  • Cadence Design (CDNS): whisper number of 0.19, four cents ahead of analysts
  • JDS Uniphase (JDSU): whisper number of 0.05, five cents short of analysts
  • Qualcomm (QCOM): whisper number of 0.94, four cents ahead of analysts

When analyzing our data, 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.

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 Aetna, Whirlpool, AOL And Hershey