Whisper Number: How Will Facebook Investors React to Earnings?

Facebook (NASDAQ:FB) is expected to report earnings on Wednesday, January 29. The whisper number is $0.29, two cents ahead of the analysts’ estimate. Whispers range from a low of $0.27 to a high of $0.31.  Facebook has a 50 percent positive surprise history, having topped the whisper in 3 of the 6 earnings reports for which we have data.

Earnings history:

– Beat whisper: 3 qtrs
– Met whisper: 3 qtrs
– Missed whisper: 0 qtrs

The whisper number has accurately indicated the actual earnings number in three of the six quarters Facebook has reported. The majority of investors polled are expecting the company to provide a neutral to positive outlook:

– Positive 50 percent
– Neutral 50 percent
– Negative 0 percent

Compare this to last quarter’s expected outlook:

– Positive 20 percent
– Neutral  40 percent
– Negative 40 percent

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 look at 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 thirty trading day timeframe.

FB114A

The strongest price movement of -7.4% comes within twenty trading days when the company reports earnings that beat the whisper number. The overall average price move is ‘negative’ (beat the whisper number and see weakness) when the company reports earnings.

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

FB114B

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 6.3 percent loss in five trading days. Last quarter, the company reported earnings four cents ahead of the whisper number. Following that report, the stock realized a 6.2 percent gain in one trading day before turning and seeing a 5.2 percent loss in twenty trading days. Overall historical data indicates the company to be (on average) a ‘negative’ price reactor when the company reports earnings.

Enter your expectation and view more earnings information here or start receiving email trade alerts by clicking here.

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 their Whisper Reactors subscription service.

More From Wall St. Cheat Sheet:

More from The Cheat Sheet