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Expected earnings reports and the whisper number impact for February 2, 2012, after market close.

Knowing how a stock's price will likely 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.

Gilead Sciences (NASDAQ:GILD) reports earnings Feb. 2, after market close. The whisper number is $1.02, three cents short of the analysts estimate. Gilead has an 78% positive surprise history (having topped the whisper in 18 of the 23 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-three earnings reports is +0.7%. The strongest price movement of -1.7% comes within thirty trading days when the company reports earnings that beat the whisper number, and +3.1% within ten trading days when the company reports earnings that miss the whisper number (opposite reactor). Last quarter the company reported earnings one cent short of the whisper number. Following that report the stock realized a 7.9% loss in thirty trading days.

Sunoco (NYSE:SUN) reports earnings Feb. 2, after market close. The whisper number is -$0.17, eight cents ahead of the analysts estimate. Sunoco has an 56% positive surprise history (having topped the whisper in 10 of the 18 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these eighteen earnings reports is +0.1%. The strongest price movement of -1.2% comes within five 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.

Take-Two Interactive (NASDAQ:TTWO) reports earnings Feb. 2, after market close. The whisper number is $0.22, one cent short of the analysts estimate. TTWO has an 38% positive surprise history (having topped the whisper in 5 of the 13 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these thirteen earnings reports is +1.3%. The strongest price movement of -8.2% comes within twenty trading days when the company reports earnings that beat the whisper number, and +6.9% within ten trading days when the company reports earnings that miss the whisper number (opposite reactor).

Fiserv (NASDAQ:FISV) reports earnings Feb. 2nd, after market close. The whisper number is $1.27, in-line with the analysts estimate. Fiserv has an 43% positive surprise history (having topped the whisper in 9 of the 21 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-one earnings reports is -0.2%. The strongest price movement of +2.0% comes within thirty trading days when the company reports earnings that beat the whisper number, and -1.2% within one trading day when the company reports earnings that miss the whisper number. Last quarter the company reported earnings six cents ahead of whisper number. Following that report the stock realized a 2.2% gain in five trading days.

When analyzing the data collected by WhisperNumber.com, 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.

Source: The Whisper Number Impact: Earnings Previews For Gilead, Sunoco, Take-Two, Fiserv

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