Does the NetApp Whisper Number Indicate Investor Confidence?

NetApp Inc. (NASDAQ:NTAP) is expected to report earnings on Wednesday. The whisper number is 80 cents, 1 cent ahead of the analysts’ estimate and showing limited confidence from investors. Whispers range from a low of 78 cents to a high of 81 cents. NetApp has a 63 percent positive surprise history (having topped the whisper in 35 of the 56 earnings reports for which we have data).

Earnings history:

  • Beat whisper: 35 qtrs
  • Met whisper: 4 qtrs
  • Missed whisper: 17 qtrs

Our primary focus is on post-earnings price movement. Knowing how likely a stock’s price will move following an earnings report can help you determine the best action to take (long or short). In other words, we analyze what happens when the company beats or misses the whisper number expectation.

The table below indicates the average post earnings price movement within a one and 30 trading day timeframe:

The strongest price movement of +6 percent comes within 20 trading days when the company reports earnings that beat the whisper number and -9.3 percent within 30 trading days when the company reports earnings that miss the whisper number. While the strongest price moves are as expected, the overall average price move is “positive” (beat the whisper number and see strength, miss and see strength) when the company reports earnings.

The table below indicates the most recent earnings reports and short-term price reaction:

The company has reported earnings ahead of the whisper number in two of the past four quarters with a whisper number. In the comparable quarter last year, the company reported earnings in line with the whisper number. Following that report, the stock realized a 4.1 percent loss in one trading day. Last quarter the company reported earnings 6 cents ahead of the whisper number. Following that report, the stock realized an 8.2 percent loss in 30 trading days. Overall historical data indicates the company to be (on average) a “positive” price reactor when the company reports earnings.

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John Scherr is the founder and president of WhisperNumber.com, an independent financial research firm focused on earnings expectations. He is a regular contributor to CNBC and Fox Business Network, and has been featured in Barron’s, The Wall Street Journal, and MarketWatch. He is considered a leading expert on “whisper numbers” and post-earnings price movement analysis. WhisperNumber.com provides specific earnings trade alerts to take advantage of earnings report price movement with its Whisper Reactors subscription service.

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