Dell Inc. (DELL) is expected to report earnings on Thursday, May 16th. The whisper number is $0.34, one cent behind the analysts' estimate. DELL has a 46% positive surprise history (having topped the whisper in 25 of the 54 earnings reports for which we have data).
- Beat whisper: 25 qtrs
- Met whisper: 1 qtrs
- Missed whisper: 28 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 -2.5% comes within 10 trading days when the company reports earnings that beat the whisper number, and +2.0% within 30 trading days when the company reports earnings that miss the whisper number. While the strongest price moves are opposite what would be expected, the overall average price move is positive when the company reports earnings that miss the whisper number from 20 to 30 trading days.
The table below indicates the most recent earnings reports and short-term price reaction:
In the comparable quarter last year, the company reported earnings one cent short of the whisper number. Following that report, the stock realized a 4.9% loss in one trading day. Last quarter, the company reported earnings two cents ahead of the whisper number. Following that report, the stock realized a 0.3% loss in after hours trading, but turned and realized a 5.3% gain in 30 trading days. Overall historical data indicates the company to be (on average) a negative price reactor (beat the whisper and see weakness, miss and see weakness) when the company reports earnings, with the exception of missing the whisper number and seeing strength from 20 to 30 trading days.
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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. Trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths.
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.