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.
Progress Energy (PGN) reports earnings Feb. 16th, before market open. The whisper number is $0.46, seven cents behind the analysts estimate. PGN has a 57% positive surprise history (having topped the whisper in 17 of the 30 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 30 earnings reports is +0.1%. The strongest price movement of +18.2% comes within 30 trading days when the company reports earnings that beat the whisper number, and -0.8% within five trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings two cents ahead of the whisper number. Following that report the stock realized a 2.6% gain in 20 trading days. More earnings information can be found here.
Duke Energy (DUK) reports earnings Feb. 16th, before market open. The whisper number is $0.21, in-line with the analysts estimate. Duke has a 58% positive surprise history (having topped the whisper in 18 of the 31 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these 31 earnings reports is -0.4%. The strongest price movement of +3.7% comes within 30 trading days when the company reports earnings that beat the whisper number, and -4.0% within 20 trading days when the company reports earnings that miss the whisper number. Last quarter the company reported earnings 4 cents ahead of the whisper number. Following that report the stock realized a 2.1% gain in 30 trading days. More earnings information can be found here.
TRW Inc. (TRW) reports earnings Feb. 16th, before market open. The whisper number is $1.58, 3 cents ahead of the analysts estimate. TRW has a 78% positive surprise history (having topped the whisper in 7 of the 9 earnings reports for which we have data). The average price movement (starting at next market open) within 10 trading days of these nine earnings reports is +0.1%. The strongest price movement of +3.4% comes within five trading days when the company reports earnings that beat the whisper number, and +21.5% within thirty trading days when the company reports earnings that miss the whisper number. TRW hasn't had a whisper number (investor attention) in the past 15 quarters. More earnings information can be found here.
Orbitz Worldwide (OWW) reports earnings Feb. 16th, before market open. The whisper number is $0.04, two cents ahead of the analysts estimate. Orbitz has never had a whisper number prior to this quarter. 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 timeframe (see link in profile to receive alerts). Keep in mind that trading on whispers is a technical play on market psychology, rather than a bet on a company's fundamental strengths. Since 1998, WhisperNumber.com has been tracking and publishing "crowd sourced estimates" for earnings.
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.
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.
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