Earnings Expectations and Market Sentiment Preview (Week of 2/13)

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Sirius Satellite, Dell, and Hewlett Packard are a few of the big names investors will be tracking this week in earnings. But can they top individual investor expectations? Results of a recent study conclude investor estimates for quarterly earnings have a greater influence on stock movement than analysts consensus estimates. And can the major indices and commodity markets live up to bullish expectations? The month end outlook is provided below.

Sirius Satellite (SIRI) is expected to report earnings on Friday, February 17th. While analysts are expecting the company to report a loss of 20 cents, individual investor expectations as published at WhisperNumber.com are a bit more optimistic looking for a loss of 18 cents. The expectations collected from individual investors at WhisperNumber.com are more commonly known as 'whisper numbers'.

The question remains - 'will Sirius beat the analysts estimates?' On average close to 80% of public companies report earnings that meet or beat the analysts estimates, so the chances of Sirius beating the analysts are very good. But will they be able to meet or beat the more influential whisper number from individual investors? If they don't the company may be 'punished' with a sell off and consequently a lower stock price. But beat the whisper number and look for the company to reap the rewards.

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 a recent 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.

Along with Sirius Satellite (SIRI) this week, earnings reports are also expected from the following:

-- Dell Computer (DELL), (2/16), whisper number is $0.41, in-line with analysts estimates

-- Applied Materials (AMAT), (2/15), whisper number is $0.17, one cent ahead of analysts

-- Hewlett Packard (HPQ), (2/15), whisper number is $0.50, six cents ahead of analysts

-- Biogen (BIIB), (2/15), whisper number is $0.46, two cents below analysts

-- Nvidia (NVDA), (2/16), whisper number is $0.49, in-line with analysts

-- Expedia (EXPE), (2/15), whisper number is $0.27, one cent ahead of analysts

All whisper number data is collected from individual investors and published by WhisperNumber.com.

A few of the firms that have met or beat the analysts estimate but missed the whisper number (from WhisperNumber.com) this quarter include General Electric (GE), 3M (MMM), United Parcel Services (UPS), 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 this quarter include Google (GOOG), 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 four firms had negative price reactions after reporting earnings.

Whisper numbers have proven themselves more accurate as well as influential. On average the standard deviation (or difference) between the actual reported earnings number and investor expectation this quarter is one penny. The average difference between the actual reported number and analysts estimate is closer to two pennies. Individual investors appear to have a better 'feel' for what can be expected from corporations for earnings.

MARKETS & COMMODITIES OUTLOOK

WhisperNumber.com also conducts twice monthly market surveys and collects the outlook and expectations of individual investors for major indices, markets, regions, and sectors. The most recent survey indicated the following:

  • GOLD PRICES: 87% of investors surveyed expect Gold prices to be at or above $540 per ounce by month end Febuary, while the rest (13%) expect the price of the metal to be lower.
  • OIL PRICES: 79% of investors surveyed expect oil to be at or above $61 per barrel by month end February, while the rest (21%) expect oil prices to be lower.
  • DOW: 68% of investors surveyed expect the DJIA to be at or below 10,899 by month end February, while the rest (32%) expect the market to be higher.
  • S&P: 59% of investors surveyed expect the S&P 500 to be at or above 1,260 by month end February, while 41% expect the market to be lower.
  • NASDAQ: 76% of investors surveyed expect the Nasdaq to be at or above 2,240 by month end February, while the rest (24%) expect the market to be lower.

More detailed market information and analysis can be found in the sentiment reports provided by WhisperNumber.com at http://www.whispernumber.com/sentiment.jsp.

About WhisperNumber.com:

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.

Additional information:

Investor's Earnings Estimates Top Analysts in Returns, Impact on Stocks:

http://www.whispernumber.com/thisjustin.jsp

Study Link:

'Conflict in Whispers and Analysts Forecast: Which One Should Be Your Guide

http://www.financialdecisionsonline.org/current/Zaima.pdf

Media Contacts:

David Hunimen, WhisperNumber.com

http://www.whispernumber.com
973-446-0553

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

408-924-3490

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John Scherr
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