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.
IHS Inc. (IHS): The whisper number is $0.77, four cents behind the analysts estimate. IHS has a 76% positive surprise history (having topped the whisper in 13 of the 17 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 17 earnings reports is -0.8%. The strongest price movement of -1.5% comes within 10 trading days when the company reports earnings that beat the whisper number, and -3.7% within 10 trading days when the company reports earnings that miss the whisper number (negative reactor). Last quarter the company did not have a whisper number. More earnings information can be found here.
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 time frame (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.
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.
