New Jersey (PRWEB) January 23, 2006
CNBC recently reported that seventy-five percent (75%) of public companies that have reported quarterly earnings for this current earnings season have met or exceeded the analyst's expectations. The market, however, has not reacted to this so-called positive news as one would expect, with the Dow (DJIA) now 380 points (-3.4%) off its highs of this new year.
In contrast, and more indicative of the markets reaction, only thirty-nine percent (39%) of public companies that have reported to date have met or exceeded individual investor expectations (whisper numbers) as tracked by WhisperNumber.com.
The common belief that stocks react to missing or beating analysts estimates is simply that -- a 'belief' with little to support it in way of facts. Obviously if seventy five percent of reporting companies have met or exceeded earnings estimates then the markets should be reacting positively and surging higher.
What stocks are reacting to is missing or beating individual investor estimates (also known as whisper numbers). A recently published university study indicates individual whisper numbers for earnings have a more significant impact on stock movement than analyst estimates. Maretno Harjoto and Janis Zaima (finance professors at San Jose State University, College of Business in California) published the study 'Conflict in Whispers and Analysts Forecast: Which One Should Be Your Guide' in the fall edition of the acclaimed Financial Decisions journal.
Two major findings from this study include:
- When actual earnings meet or beat analyst forecasts but not the whisper number, on average, the stock exhibits significant losses after the earnings release indicating that the market reacts to the whisper number over the analysts estimate.
- When actual earnings per share (EPS) meet or beat both whispers and analyst forecasts, the stock reacts positively before and after the earnings release. And when actual EPS does not beat both whispers and analysts the stock reacts negatively on the earnings announcement date and after it.
This was the first study of whisper numbers to exclusively use data from http://www.WhisperNumber.com.
These findings support the fact that as companies have missed the majority of expectations from individual investors in this current quarter, the market has moved in a negative direction as a result of those missed expectations.
A few of the firms that have met or beat the analysts estimate but missed the whisper number (from WhisperNumber.com) this quarter include Motorola (MOT), Walgreen (WAG), JP Morgan (JPM), International Game Technology (IGT), and Southwest Airlines (LUV). Each of these companies have suffered losses after reporting earnings.
Companies that have missed both the analysts estimate and the whisper number include Intel (INTC), Yahoo! (YHOO), and Alcoa (AA). As indicated earlier, the Harjoto/Zaima study indicates that when a company's earnings do not beat both whispers and analysts the stock reacts negatively on the earnings announcement date and after it. All three firms had negative price reactions after reporting earnings.
This week, earnings season continues with reports from Sirius Satellite (SIRI) and Microsoft (MSFT). Individual investors have a whisper number of -$0.20 for Sirius, while analysts are expecting -$0.21. The expectations for Microsoft are a little more optimistic with a whisper number of 35 cents against the analysts consensus of 33 cents (according to WhisperNumber.com).
Dow 30 companies expected to report this week include:
- American Express (AXP), whisper number is $0.61, two cents ahead of analysts
- United Technologies (UTX), whisper number is $0.72, two cents ahead of analysts
- 3M (MMM), whisper number is $1.09, six cents ahead of analysts
- General Motors (GM), whisper number is -$0.12, three cents ahead of analysts
- ATT Corp (ATT), whisper number is $0.43, one cent behind analysts
S&P 500 companies expected to report this week include:
- Texas Instruments (TXN), whisper number is $0.41, one cent behind analysts
- Bank of America (BAC), whisper number is $1.04, two cents ahead of analysts
- Ford Motor (F), whisper number is $0.00, one cent behind analysts
- Lexmark Intl (LXK), whisper number is $0.51, one cent ahead of analysts
Nasdaq 100 companies expected to report this week include:
- Sun Microsystems (SUNW), whisper number is $0.01, two cents ahead of analysts
- JDS Uniphase (JDSU), whisper number is $0.00, equal to the analysts estimate
- Qualcomm (QCOM), whisper number is $0.39, once cent ahead of analysts
- CDW Computer Centers (CDWC), whisper number is $0.84, equal to the analysts estimate
- Checkfree Holdings (CKFR), whisper number is $0.41, equal to the analysts estimate
- Juniper Networks (JNPR), whisper number is $0.20, equal to the analysts estimate
All whisper number data is provided by WhisperNumber.com.
Even though whisper numbers are the collective earnings expectations expressed by individuals, stock participants find them to be informative and can rely on whispers to invest. WhisperNumber.com has been tapping into the so-called 'wisdom of crowds' (in this case 'wisdom of individual investors') since its inception in 1998.
WhisperNumber.com is an independent financial research firm that collects sentiment and market expectations from the investment public. The "whisper number" found on WhisperNumber.com is derived from an average of individual investors' expectations regarding earnings for the most recent quarter. The whisper number is available to the general public and is considered an alternative to analyst estimates (or consensus numbers) for quarterly earnings. The company also gathers whisper numbers for monthly economic expectations data from investors, and publishes market sentiment data on US & Global Stock Markets, bonds, sectors, ETF's, currencies, and all major commodities in the metals, energy, and agricultural groups.
Investor's Earnings Estimates Top Analysts in Returns, Impact on Stocks:
'Conflict in Whispers and Analysts Forecast: Which One Should Be Your Guide
David Hunimen, WhisperNumber.com
Janis Zaima, San Jose State University
Professor of Finance
San Jose State University
College of Business, BT850
Dept of Accounting & Finance
San Jose, CA 95192-0066
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