Key Takeaways
- Unofficial EPS forecasts shared privately among traders.
- Influence stock prices before earnings announcements.
- Often differ from public consensus estimates.
- Carry risks of inaccuracy and regulatory issues.
What is Whisper Number?
A whisper number is an unofficial earnings per share (EPS) forecast circulated privately among traders, analysts, and select investors before a company's earnings announcement. It often diverges from the public consensus, reflecting the market's more nuanced expectations based on insider insights or updated models.
These numbers influence trading behavior and can cause stock price fluctuations ahead of official reports, making them a critical factor in short-term market dynamics.
Key Characteristics
Whisper numbers possess distinct features that differentiate them from standard consensus estimates:
- Unofficial and informal: They are not published publicly but shared discreetly, often reflecting analyst updates beyond the consensus.
- Market sentiment indicator: Whisper numbers signal extra optimism or pessimism compared to public forecasts, impacting pre-earnings rally or sell-offs.
- Derived from private sources: They may stem from analyst intuition, market rumors, or selective disclosures constrained by regulations like Sarbanes-Oxley.
- Potentially more accurate: Some studies suggest whisper numbers outperform consensus estimates in forecasting actual earnings surprises and price movements.
How It Works
Whisper numbers circulate among professional traders who use them to gain an edge before earnings releases. If a company’s actual EPS surpasses the whisper number, stocks often react positively, even if the official consensus was lower.
Conversely, missing the whisper number can trigger adverse price reactions despite beating consensus. These dynamics arise because whisper numbers incorporate the latest information and sentiment not captured in aggregated public estimates like those from IBES.
Examples and Use Cases
Whisper numbers influence various sectors and investment decisions:
- Airlines: Companies such as Delta often see stock price movements driven by whisper numbers ahead of earnings, reflecting industry-specific news or operational updates.
- Market benchmarks: Broad indexes like the SPY ETF can also be affected by aggregate whisper expectations for constituent companies.
- Growth investing: Investors focused on best growth stocks track whisper numbers to anticipate earnings surprises that could trigger sharp price rallies.
Important Considerations
While whisper numbers can provide valuable insights, they carry risks including inaccuracies, biases, and potential regulatory issues related to selective disclosure. You should cross-reference whisper figures with consensus data and remain cautious about over-reliance.
Additionally, trading on whisper numbers involves navigating dark pool activity and understanding cost of capital factors such as WACC when assessing company valuations. Incorporating statistical rigor like analyzing p-values can improve the reliability of your earnings forecasts.
Final Words
Whisper numbers offer a glimpse into market expectations beyond official estimates, often driving stock price movements before earnings reports. To leverage this insight, compare whisper numbers with consensus estimates to better gauge market sentiment ahead of key announcements.
Frequently Asked Questions
A Whisper Number is an unofficial earnings per share (EPS) forecast shared privately among select traders and analysts, often differing from the public consensus estimates. These numbers reflect market rumors or updated analyst insights before a company's earnings release.
Traders use Whisper Numbers to anticipate earnings surprises, buying or selling shares ahead of official reports. Stocks often rise if actual earnings beat the whisper number and can fall if earnings miss these private expectations, even if they meet public consensus.
No, Whisper Numbers typically come from private analyst updates, market rumors, or data modeling rather than illegal insider trading. However, regulations like Sarbanes-Oxley restrict selective disclosure to prevent unfair advantages.
In some studies, Whisper Numbers have shown higher predictive value for stock price movements and earnings surprises compared to consensus estimates. Still, they can be inaccurate or manipulated, so they carry risks for investors.
Historically, Whisper Numbers were shared only with elite traders and wealthy clients, but now some platforms publish them publicly. Despite this, professional investors tend to have better access and understanding of these unofficial forecasts.
Whisper Numbers can be inaccurate, manipulated, or part of fraudulent schemes, potentially leading to investment losses. Investors should use them cautiously and be aware of regulatory limitations and possible bias.
While Whisper Numbers most commonly refer to EPS forecasts, they can also apply to other financial metrics such as revenue or other key data released by companies.
