What is a Whisper Number?
Let me tell you directly: a whisper number is that purported, unofficial, and unpublished earnings per share (EPS) forecast coming from professional traders and fund managers on Wall Street. You can also apply it to any news or data release in any market.
It can refer to expected future earnings or revenues based on what a group of individual investors thinks. In this case, a website might compile it by polling its visitors. Essentially, you're looking at the unofficial consensus on what a company's earnings and revenue will be at the next announcement.
Key Takeaways
- The whisper number is the unofficial expectation of what a news release will be.
- This sometimes differs from the officially published analyst forecasts.
- Market prices often react relative to the whisper number, since the whisper is what traders believe and have acted on, or will act on.
Understanding the Whisper Number
Earnings forecasts come from analyst expectations, and analysts usually group their forecasts together so they aren't singled out if they're way off. Consensus estimates can be accurate, but the whisper number is what analysts, traders, and fund managers are really thinking—though analysts won't publish it to avoid standing out and risking their jobs if they're wrong. You see, staying with the pack keeps your career safe as an analyst; straying and making too many bad calls could get you fired.
Whisper numbers become useful when they differ from the analysts' consensus forecast. Use them as a tool to spot or avoid an earnings surprise or disappointment, but only if they're more accurate than the consensus. Until the actual announcement, no one knows if the whisper or the consensus is closer to the truth.
Whisper numbers can be wrong. If the whisper is much higher than the consensus, people might buy the stock ahead of earnings. Then, if actual earnings beat the consensus but fall below the whisper, the stock could sell off. If earnings top the whisper, the stock will likely rise, no matter the consensus. In short, stock prices react to earnings relative to the whisper number because that's what traders believe and act on.
Myths and Questions Raised About Whisper Numbers
As an individual investor, you have access to a ton of information—and misinformation—compared to investors in the past. Back in the day, the whisper number was the top info brokers gave to their richest clients, whispering what the firm's analyst really thought or knew but wouldn't publish.
But increased regulatory scrutiny on brokerages has made getting a whisper number in that old way much harder. Regulations like Sarbanes-Oxley set stricter rules on disclosing financial data, and employees, financial pros, and brokerages face big penalties for giving insider earnings data to select people.
Some doubt whether whisper numbers were ever really shared that way; certain brokers call the whole idea a myth. Now, whisper numbers based on individual opinions, not broker input, are marketed by various websites. You can even gauge the whisper from social media chatter.
It's possible for a whisper number to predict earnings more accurately than consensus estimates, but that doesn't make them inherently more valid. It does explain why stock prices sometimes react oddly compared to consensus after earnings releases.
Example of a Whisper Number
Take Apple Inc. (AAPL) with a quarterly earnings forecast of $5 per share. Traders actually believe it'll be higher, around $6 per share, so the price gets pushed up ahead of earnings, pricing in that $6 EPS.
If earnings come out at $6, a few might be surprised and the stock could move a bit, but mostly the price already reflects it. If it's $7, everyone is surprised, and the stock jumps. If it's $5—in line with consensus but below the whisper—the stock likely sells off.
The whisper isn't the only factor on stock price, though. If EPS beats the whisper but stock index futures sold off that day, the stock might drop too. It's tough to estimate how many people use the whisper ahead of earnings, making reactions hard to predict when the actual number drops.
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