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Entry from October 16, 2009
Whisper Number

A “whisper number” is an unofficial earnings estimate—a rumor or “whispered number” among analysts. A company might project an official earnings estimate, but analysts often expect the actual earnings numbers to be higher or lower than officially reported. The “whisper number” need not be merely a whisper; whisper numbers are often posted on websites. A company’s stock price often goes up or down depending if the company made or missed its whisper number (and not its official earnings projection).

“Whisper number” is cited in print since at least 1996, when it was popularly used with new and wildly fluctuating technology stocks.

Wikipedia: 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Whisper numbers are the “unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street… generally reserved for the favored (wealthy) clients of a brokerage.” 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.

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 analysts 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%. 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.

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. 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.

For a real world example, Deckers Outdoor (DECK) reported earnings of $2.69 per share after the market closed on Thursday, February 28, 2008 and provided 2008 guidance above the consensus estimates. 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 EarningsWhispers.com, was $2.70 per share. 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.

BNET Business Dictionary
Business Definition for: Whisper Number
an estimate of a company’s earnings that is based on rumors

whisper number
An unofficial estimate of a financial variable (generally, earnings or revenues) that will be reported by a corporation. A whisper number may be different from published estimates by financial analysts or earnings guidance provided by corporate management.

Whisper Number
1. Traditionally, the unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street. In this context, whisper numbers were generally reserved for the favored (wealthy) clients of a brokerage.

2. A company’s forecasted future earnings or revenues according to the collective expectations of individual investors. In this sense, a whisper number would be compiled by a website polling its visitors. Individuals come up with a whisper number using their own analyses of company financials, market trends, gut feel, etc.

What is a Whisper Number?
Whisper numbers are unofficial earnings numbers that are related to a given stock or investment option. The whispered number typically makes its way around a given market and sometimes can be the motivation for investors to act on a hunch and buy or sell a particular security. While these rumored earnings numbers may have some basis in fact, they more generally the result of speculation that may or may not be logical or practical.

Google Books
29 July 1996, New York magazine, ‘The Big Mo” by James J. Cramer, pg. 14, col. 3:
That’s how I discovered that last year it became not enough to just beat the number. You also had to beat the “whisper number.” That’s the quarterly-earnings estimate for a company that’s higher than the official number that analysts declare. It’s the number the companies tried to discourage analysts from going public with, but that they hoped they could beat if the quarter finished well. Only a handful of companies, mostly tech companies, could perform strongly enough to beatthis secret-handshake number. In fact, lately, if you didn’t beat the whisper number by a penny or two, your stock got clobbered.

The Wall Street Journal
Traders Ignore the ‘Official,’ Act on ‘Whispered’ Estimates
Thursday, January 16, 1997
NEW YORK—Take those official earnings estimates with a grain of salt, and listen for the whisper.

In a market obsessed with the earnings momentum of technology stocks, many traders and analysts are ignoring published earnings estimates and trading stocks based on whether they meet or beat the “whisper” earnings that swirl among traders and investors—including on the Internet—ahead of the official earnings report.
Michael Moe, growth stock strategist at Montgomery Securities, said whisper earnings have been around for several years but their importance has intensified recently, especially for technology stocks.

“The whisper ... becomes in effect more important than the published number,” he said. “The whisper is increasingly becoming the true expectation.”

New York (NY) Times
Dell Earnings Soar With Sales Growth Triple PC Industry’s
Published: Wednesday, February 26, 1997
Securities analysts had expected Dell to report earnings of 83 cents a share, according to First Call. Analysts said Dell had in fact hit the ‘’whisper number’’—which is sometimes circulated to clients by word of mouth on certain hot stocks, but not published.

Time magazine
By Daniel Kadlec Monday, Jul. 14, 1997
Wall Street has a zillion ways to deal you out. You never got a chance at the Netscape IPO? Of course not: hot stock offerings are reserved for big-bucks investors. Couldn’t make sense of Intel’s latest gibberish on chip demand next quarter? Sure you couldn’t: important details get explained in exclusive conference calls. No matter how small investors try to level the field, it always ends up tilted. Get ready for another uphill climb. In the coming weeks, companies will begin reporting second-quarter results, and some stocks will react in ways that defy logic. Why? They are being moved by a relatively new Wall Street device, the “whisper number.” Trust me. This whisper is more exciting than anything a dream date might pant into your ear.

The whisper number is, simply, the most up-to-the-minute Wall Street estimate of what a company will earn in a given quarter. The name derives from the air of secrecy surrounding it. No one puts the number in writing; few admit to even speaking it. Yet there are probably whisper numbers for up to 200 stocks each quarter.

Google Books
20 October 1997, New York magazine, “October Surprises” by Larry Black, pg. 22, col. 3:
Whisper numbers are the unofficial, last-minute revised estimates of the earnings numbers that circulate ahead of an announcement (and are even reported on CNBC). Some are just Internet gossip, but others come from analysts, who reveal them to their best clients. The SEC believes whisper numbers may originate with company officials, who often review and comment on analysts’ reports before they’re released to the broader market.

Posted by Barry Popik
New York CityBanking/Finance/Insurance • (0) Comments • Friday, October 16, 2009 • Permalink