Will Facebook Earnings Fall Short Again?

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Facebook (FB) is expected to report earnings on Wednesday, January 27th. The whisper number is $0.71, three cents ahead of the analysts’ estimate and showing confidence from the WhisperNumber community. Whispers range from a low of $0.67 to a high of $0.82. Facebook has a 71% positive surprise history (having topped the whisper in 10 of the 14 earnings reports for which we have data).

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Earnings history:

– Beat whisper: 10 qtrs

– Met whisper: 0 qtrs

– Missed whisper: 4 qtrs

The whisper number has been more accurate than analysts estimates for 92% of all Facebook earnings reports.

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 thirty trading day timeframe:

FB116A

The strongest price movement of -4.2% comes within twenty trading days when the company reports earnings that beat the whisper number, and -4.0% within twenty trading days when the company reports earnings that miss the whisper number. The overall average post earnings price move is ‘negative’ (beat the whisper number and see weakness, miss and see weakness) when the company reports earnings.

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

FB116B

The company has reported earnings ahead of the whisper number in one of the past four quarters with a whisper number. In the comparable quarter last year the company reported earnings five cents ahead of the whisper number. Following that report the stock realized an 1.8% loss in five trading days. Last quarter the company reported earnings four cents short of the whisper number. Following that report the stock realized a 4.4% loss in five trading days. Overall historical data indicates the company to be (on average within thirty trading days) a ‘negative’ price reactor when the company reports earnings.

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WhisperNumber provides detailed earnings analysis and earnings trade alerts. Learn more here.

[Image courtesy of Alux.com]

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