Can Facebook Beat the Whispers?
Facebook (NASDAQ:FB) is expected to report earnings on Wednesday, July 24, after the closing bell. The whisper number is $0.15, one cent ahead of the analysts’ estimate. Whispers range from a low of $0.12 to a high of $0.17. FB has a 25 percent positive surprise history (having topped the whisper in 1 of the 4 earnings reports for which we have data).
– Beat whisper: 1 quarters
– Met whisper: 3 quarters
– Missed whisper: 0 quarters
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 strongest price movement of -12.2 percent comes within twenty trading days when the company reports earnings that beat or meet the whisper number. Obviously data is limited but the overall average price move is ‘negative’ (beat the whisper and see weakness, meet the whisper and see weakness) when the company reports earnings.
The table below indicates the most recent earnings reports and short-term price reaction:
The company has reported earnings above the whisper number in one of the past four quarters. In the comparable quarter last year the company reported earnings in-line with the whisper number. Following that report the stock realized a 13.7 percent loss in five trading days. Last quarter the company reported earnings in-line with the whisper number. Following that report the stock realized a 16.8 percent loss in thirty trading days. While the data is limited, overall historical data indicates the company to be (on average) a ‘negative’ 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 their Whisper Reactors subscription service.