Seeking Alpha
Research analyst, special situations
Profile| Send Message| ()  

Expected earnings reports and the whisper number impact for Thursday, April 26th:

Dow Chemical (DOW): The whisper number is $0.61, one cent ahead of the analysts estimate. Dow has a 59% positive surprise history (having topped the whisper in 20 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 -0.4%. The strongest price movement of +0.4% comes within five trading days when the company reports earnings that beat the whisper number, and -7.6% within twenty trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings six cents short of the whisper number. Following that report the stock realized a 4.0% gain in thirty trading days. Enter your expectation and see more earnings information here.

Entergy (ETR): The whisper number is $0.90, ten cents ahead of the analysts estimate. Entergy has a 50% positive surprise history (having topped the whisper in 10 of the 20 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these twenty earnings reports is -0.1%. The strongest price movement of +1.9% comes within thirty trading days when the company reports earnings that beat the whisper number, and -0.7% within ten trading days when the company reports earnings that miss the whisper number. The company has not had a whisper number since August 2011. Enter your expectation and see more earnings information here.

Tellabs (TLAB): The whisper number is -$0.04, one cent behind the analysts estimate. Tellabs has a 46% positive surprise history (having topped the whisper in 17 of the 37 earnings reports for which we have data). The average price movement (starting at next market open) within ten trading days of these thirty-seven earnings reports is +1.9%. The strongest price movement of +1.6% comes within ten trading days when the company reports earnings that beat the whisper number, and +3.4% within twenty trading days when the company reports earnings that miss the whisper number (positive reactor). The company has not had a whisper number since January 2011. Enter your expectation and see more earnings information here.

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.

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.

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).

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.

Disclaimer: All trading involves risk, and the information presented is not intended to be a recommendation of any kind.

Source: Whisper Number Impact: Earnings Preview For Dow Chemical, Entergy, And Tellabs