Hovnanian Enterprises (NYSE:HOV) is expected to report fiscal first quarter earnings on Wednesday, March 6th. The whisper number is -$0.02, eight cents ahead of the analysts' estimate. Whispers range from a low of -$0.13 to a high of $0.01. HOV has a 53% positive surprise history (having topped the whisper in 9 of the 17 earnings reports for which we have data).
- Beat whisper: 9 qtrs
- Met whisper: 0 qtrs
- Missed whisper: 8 qtrs
Our primary focus is on post earnings price movement. Knowing how likely a stock's price will move following an earnings report can help you determine the best action to take (long or short). In other words, we look at what happens when the company beats or misses the whisper number expectation.
The table below indicates the average post earnings price movement within a one and 30 trading day timeframe:
The strongest price movement of -11.3% comes within 20 trading days when the company reports earnings that beat the whisper number, and +14.5% within 10 trading days when the company reports earnings that miss the whisper number (opposite reactor).
The table below indicates the most recent earnings reports and short-term price reaction:
The post earnings price movement within five trading days has been positive in four of the four most recent quarters. The company did beat the whisper number in three out of four of these quarters. In the comparable quarter last year, the company reported earnings 33 cents ahead of the whisper number. Following that report, the stock realized a 15.1% gain in five trading days. Last quarter, the company reported earnings four cents short of the whisper number. Following that report, the stock realized a 14.4% gain in five trading days. While overall historical data indicates a negative price reaction following earnings, more recent reports indicate a strong and positive short-term price move when the company tops expectations.
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Since 1998, WhisperNumber.com has been tracking and publishing "crowd sourced estimates" for earnings. We call these earnings expectations whisper numbers. Our whisper numbers are gained from individual investors and traders just like you that have registered with our site. While the whisper number itself is an important part of our analysis, a company's "price reaction" to beating or missing 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.