THE POWER OF THE WHISPER NUMBER
Investors cannot simply dismiss what whisper number can do, especially when companies release their earnings report. This season becomes more exciting with projections and speculations, plus reactions and earnings announcements. Today, we cannot deny the accurateness and significance of whisper numbers. Amidst the buzz and influence brought by the release, it is important to take note of the whisper number.
In essence, the whisper number is the unofficial valuations about company earnings being released in the market. Oftentimes, whisper numbers will vary from earnings estimates and consensus estimates. How does whisper number affect the market?
We will refer to Apple Inc. for discussion purposes. WhisperNumber and other aggregators, based on collated data, noted the following: the tech giant successfully surpassed the whisper number in 47 of 68 analyzed quarters, matched it in three, and missed in 18. Hence, a 69% positive score for Apple. Since 1998, Apple’s earnings have indicated whisper numbers have been more precise than analyst predictions when it comes to projecting actual earnings.
Let us look at their third quarter earnings report released on July 21, 2015. Apple recorded earnings of $1.85 a share on revenue of $49.6 billion, better than the consensus earnings valuation of $1.85 a share on revenue of $49.3 billion. However, its stock slipped by 4.23% on the following trading day and has been declining since then.
Why? The actual quarterly earnings missed the earnings whisper of $1.95 a share on revenue of $49.26 billion, not to mention market participants’ high expectations. They believed Apple earnings would be met or outshined, but it did not transpire that way. Even though the company earnings beat analyst estimates, investors reacted to it negatively. And in the market, negative reactions normally last for a few trading sessions.
Referring to the example above, the whisper number carries more importance than any other projections. Even if a company earnings meet or beat official earnings, stocks can still decline when actual earnings have failed to trail the whisper estimates.
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