General Mills (NYSE:GIS) reports earnings Sept. 22nd, before market open. Within the past few days the whisper number has moved one cent lower to $0.64 and is now in-line with the analysts estimates. General Mills has exceeded the whisper number in 19 of the past 30 earnings reports. The stock price is up 22% from this time last year, and even though they fell short of the whisper number last quarter the price weakness was limited and the stock has since recovered.
* Average actual earnings for past year: $1.05
* Average whisper number for past year: $0.98
Last quarter the General Mills price reaction following their earnings report was +1.3% in one trading day, and +3.96% in five trading days following earnings. The average price move following an earnings report is very limited (less than one percent) in either direction through 30 trading days.
With respect to negative earnings surprises, General Mills has reported well below WhisperNumber.com's whisper number over the last two quarters by an average of 3.9% (General Mills has missed the whisper in each of the past two quarters by an average of 2 cents). This suggests that General Mills has underperformed average investor expectations during this period.
The majority of investors polled are expecting a positive outlook from the company:
- Positive 50.0%
- Neutral 44.0%
- Negative 6.0%
General Mills earnings have historically given investors a positive surprise as they have exceeded investor expectations more times than missed:
- Beat whisper: 19 qtrs
- Met whisper: 1 qtrs
- Missed whisper: 10 qtrs
While the company has historically been able to top expectations, the price reaction has been limited to negative.
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.
Companies that exceed both the whisper number (from WhisperNumber.com) and the analysts estimate see a 2.5 times greater positive post earnings price move than companies that only exceed the analysts estimate but miss the whisper.
The whisper number is derived from an average of individual investors, floor traders, investment advisors, and market strategists expectations regarding earnings for the most recent quarter.
Additional post earnings reaction data can be found at http://www.whispernumber.com.
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