Google (GOOG, GOOGL) is expected to report earnings on Thursday, October 22nd. The whisper number is $7.13, seven cents behind the analysts’ estimate and showing little confidence from the WhisperNumber community. Whispers range from a low of $7.00 to a high of $7.30. Google has a 61% positive surprise history (having topped the whisper in 27 of the 43 earnings reports for which we have data).
– Beat whisper: 27 qtrs
– Met whisper: 0 qtrs
– Missed whisper: 17 qtrs
Once again the ‘low’ whisper number expectation should not come as a surprise. Investors had come to expect blow out numbers quarter in and quarter, and when that stopped so did the excitement that came with a Google earnings report. Over the past seven quarters, Google has reported earnings short of the whisper number expectation in five reports. After last quarters blow out number (38c ahead of the whisper number) and this years price jump, Google may be looking to start re-living those glory days.
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:
The strongest price movement of -0.6% comes within five trading days when the company reports earnings that beat the whisper number, and -1.0% within thirty trading days when the company reports earnings that miss the whisper number. The overall average post earnings price move is very limited and ‘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:
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 thirty-eight cents short of the whisper number. Following that report the stock realized a 3.1% loss in one trading day. Last quarter the company reported earnings thirty-eight cents ahead of the whisper number. Following that report the stock realized a 2.9% gain in one trading day, before turning and seeing a 2.3% loss within ten trading days, and then moving to a 7.4% loss in thirty trading days. Overall historical data indicates the company to be (on average) a ‘negative’ price reactor when the company reports earnings.
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[Image Courtesy of DigitalTrends.com]