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Expected earnings reports and the whisper number impact for March 7th, 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.

H&R Block (HRB): The whisper number is $0.06, one cent ahead of the analysts estimate. HRB has a 67% positive surprise history (having topped the whisper in 18 of the 27 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-seven earnings reports is +0.4%. The strongest price movement of +2.6% comes within twenty trading days when the company reports earnings that beat the whisper number, and -2.0% within ten trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings one cent short of the whisper number. Following that report the stock realized a 2.9% loss in one trading day, before seeing strength of 5.9% through thirty days. More earnings information can be found here.

Coldwater Creek (CWTR): The whisper number is -$0.16, four cents ahead of the analysts estimate. CWTR has a 50% positive surprise history (having topped the whisper in 6 of the 12 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twelve earnings reports is +1.3%. The strongest price movement of +3.9% comes within ten trading days when the company reports earnings that beat the whisper number (before seeing weakness of -11.7% in thirty trading days), and -3.8% within thirty trading days when the company reports earnings that miss the whisper number. More earnings information can be found here.

Pall Corp. (PLL): The whisper number is $0.76, two cents ahead of the analysts estimate. PLL has a 54% positive surprise history (having topped the whisper in 13 of the 24 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty-four earnings reports is -0.4%. The strongest price movement of -6.9% comes within thirty trading days when the company reports earnings that beat the whisper number, and +7.1% within thirty trading days when the company reports earnings that miss the whisper number (opposite reactor). Last quarter the company reported earnings nine cents ahead of the whisper number. Following that report the stock realized a 7.6% gain in thirty trading days. More earnings information can be found here.

Reported this morning, before market open:

  • American Eagle Outfitters (AEO); reported earnings of $0.35, one cent short of the whisper number
  • Ciena Corp (CIEN); reported earnings of -$0.13, eight cents short of the whisper number
  • Hovnanian (HOV); reported earnings of -$0.17, thirty-three cents ahead of the whisper number

Disclaimer: 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.

Source: The Whisper Number Impact: Earnings Preview For H&R Block, Coldwater Creek, Pall