Whisper Number Impact: Earnings Preview For Toll Brothers, TJX Companies, Chico's FAS

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Includes: BKS, CHS, DELL, HD, M, TJX, TOL
by: John Scherr

Expected earnings reports and the whisper number impact for February 22nd, 2012, before market open.

Toll Brothers (NYSE:TOL): The whisper number is $0.05, three cents ahead of the analysts' estimate. Toll has a 62% positive surprise history (having topped the whisper in 13 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 -0.3%. The strongest price movement of +2.0% comes within five trading days when the company reports earnings that beat the whisper number, and -2.3% within thirty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings six cents ahead of the whisper number. Following that report the stock realized a 7.6% loss in ten trading days, before turning to gains of 9.5% in thirty days. More earnings information can be found here.

TJX Companies (NYSE:TJX): The whisper number is $0.60, two cents behind the analysts' estimate. TJX has a 74% positive surprise history (having topped the whisper in 25 of the 34 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these thirty-four earnings reports is +0.3%. The strongest price movement of +4.1% comes within thirty trading days when the company reports earnings that beat the whisper number, and +1.1% within ten 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 an 8.5% gain in thirty trading days. More earnings information can be found here.

Chico's FAS (NYSE:CHS):The whisper number is $0.09, one cent behind the analysts estimate. Chico's has a 53% positive surprise history (having topped the whisper in 8 of the 15 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these fifteen earnings reports is -2.3%. The strongest price movement of -8.3% comes within ten trading days when the company reports earnings that beat the whisper number, and -5.2% within ten trading days (before turning to gains of 6.1% in thirty days) when the company reports earnings that miss the whisper number. The company hasn't seen a whisper number since August 2009. More earnings information can be found here.

More, accurate whisper numbers from recent earnings reports:

- Dell Inc. (NASDAQ:DELL) reported $0.51, whisper number was $0.51, analysts were $0.52
- Barnes & Noble (NYSE:BKS) reported $0.71, whisper number was $0.88, analysts were $0.92
- Home Depot (HD) reported $0.50, whisper number was $0.43, analysts were $0.42
- Macy's (M) reported $1.70, whisper number was $1.66, analysts were $1.65

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.

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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 (see link in profile to receive alerts). Since 1998, WhisperNumber.com has been tracking and publishing 'crowd sourced estimates' for earnings. 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.