- Whisper number
Whisper numbers are the “unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street... generally reserved for the favored (wealthy) clients of a brokerage.”ref|Investopedia According to Per Afrell, a former analyst at UBS Warburg, buy and sell side research analysts generally maintain a 20 plus page spreadsheet to calculate their earnings per share estimates. When the estimate is first calculated by sell-side analysts, the number is submitted to companies such as First Call to be averaged with other analysts’ estimates for the consensus earnings estimate. As new information is made available and plugged into the spreadsheet, the calculation may change several times leading up to a company’s actual earnings release. However, the analyst is generally not going to issue a new report and revise his or her published estimate with each new calculation, resulting in the analyst’s true expectations differing from his or her published number. Therefore, when someone within the firm, an institutional client, or even a retail client asks the analyst his or her expectation for the company, the response is often different than the published estimate. This number then gets passed among trading desks and professional traders as the whisper number.ref|Dagens
Because the whisper number is the analysts’ true expectation, it tends to be more accurate than the officially published consensus estimates. The Wall Street Journal found one website that gathers whisper numbers from research analystsref|WSJ and a Bloomberg News study found these same numbers to miss actual reported earnings by 21% while the officially published consensus earnings estimates missed actual results by an average of 44%ref|Bloomberg. Furthermore, a joint study by the universities of Michigan, Indiana, and Purdue also found that whisper numbers were more effective at predicting actual earnings results than the consensus earnings estimates.ref|Purdue
Consequently, stocks have been shown to react to whisper numbers more so than the consensus earnings estimates. A 2002 research report found that stocks of companies that beat the whisper number had an average one day gain of more than 2% while the stocks of companies that beat the consensus earnings estimate but missed the whisper number gained approximately one-tenth of one percent on the first day of trading.ref|EW Furthermore, the joint academic study found that a trading strategy based on whisper numbers either before the company’s earnings release or after the actual report “significantly” outperformed the S&P 500.ref|Purdue
For a real world example, Deckers Outdoor (DECK) reported earnings of $2.69 per shareref|DECK after the market closed on Thursday, February 28, 2008 and provided 2008 guidance above the consensus estimates.ref|TradingMarkets The reported results were $0.35 per share above the consensus earnings estimate of $2.34 per share. A number of analysts had indicated in the days and weeks leading up to its earnings release that they expected the company to beat estimates and the whisper number, as published by [http://www.earningswhispers.com EarningsWhispers.com] , was $2.70 per share.ref|WR The stock gained more than $10 during the two weeks heading into the company’s earnings release at least in part due to the expectations of the upside surprise, but on Friday, February 29, 2008, shares of Deckers Outdoor traded down approximately $10 after missing the whisper number by a penny.
References
# cite web|url=http://www.investopedia.com/terms/w/whispernumber.asp|publisher=Investopedia|title=Whisper Number|accessdate=2006-04-28|author=Invesopedia
# cite news|publisher=Dagens Industri|title=He’s Whispering Homerun Earnings|first=Daniel|last=Svensson|date=1999-9-23
# cite web|url=http://online.wsj.com/article/SB964184868742365109.html|publisher=Dow Jones|work=Wall Street Journal|title=Consider the Source When Evaluating 'Whisper Estimates' on the Internet|date=2000-07-23
# cite news|publisher=Bloomberg Magazine|title=Whispers That Roar|first=Ed|last=Leefeldt|date=August 1999
# cite news|publisher=Journal of Accounting and Economics|title=Whisper Forecasts of Quarterly Earnings per Share|author=Mark Bagnoli, Messod Daniel Beneish, Susan G. Watts|date=March 1999
# cite news|publisher=EarningsWhispers|title=How to Make Earnings Whisper Plays|date=2002-01-16
# cite news|publisher=Deckers Outdoor|title=Deckers Outdoor Corporation Reports Record Fourth Quarter Financial Results|date=2008-02-28
# cite web|url=http://www.tradingmarkets.com/.site/news/Stock%20News/1149765/|publisher=TradingMarkets|title=Deckers Outdoor Guides Above Estimates|accessdate=2008-02-28|
# cite news|publisher=EarningsWhispers|title=The Downtrend is Still Holding|work=Whisper Report|date=2008-02-25 Further reading
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*External links
* [http://earningswhispers.com/ EarningsWhispers.com]
* [http://www.istockanalyst.com/ iStockAnalyst.com]
* [http://whispernumber.com/ WhisperNumber.com]
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