Whisper number definition
A whisper number is an unofficial and informal estimate of the expected earnings per share for the securities or stocks of a particular company. Most whisper numbers are based on publicly available information and are the result of analysis by investment professionals. In other cases, whisper numbers may be based on hunches, guesses, or rumors regarding the company, its management, and its prospects for current and future profits. Earnings whisper numbers are much more common immediately preceding the actual announcement of a company’s earnings. These whisper numbers are sometimes given more credence than the consensus assessment of the likely earnings per share to be reported by a particular company due to the perception that they offer more potential for profit and beating the curve in the investment market.
Whisper numbers have in the past sometimes associated negatively with insider trading and other illegal activities; in fact, the SEC has instituted fair disclosure regulations that require companies to immediately release information to the general public if it is improperly disclosed to an unauthorized person, either accidentally or intentionally. This is intended to prevent companies from releasing earnings whisper numbers and other unauthorized information unequally and unfairly. Most whisper number information is not derived from inside sources, however, and is based on other factors including knowledge of the company’s recent activities and expansions, management choices, and overall economic conditions at the time the whisper number is circulated.
Effects of whisper numbers
In many cases, whisper numbers are the catalyst for large-scale buy-ups or sell-offs of a particular stock; if the information turns out to be correct, the investors who acted on the whisper number tip can reap significant financial rewards. If, however, the information is inaccurate or false, it can create major losses for investors who may have acted in good faith on the whisper number information. In extreme cases, however, earnings whisper numbers can have devastating effects not only on the profits of investors but on the company’s overall financial situation as well; runs on stock can drive up prices and increase profitability in the short run, but negative whisper numbers can lead to a catastrophic sell-off of stock and create serious financial difficulties for the company in question.
Whisper number example
A recent example of the whisper number having a significant effect on the value of a company’s stock is that of IBM in early 2010. IBM reported its fourth-quarter 2009 earnings per share of $3.59 on January 19, 2010. While most market analysts had expected reported earnings per share of $3.47, the earnings whisper number for IBM had settled at $3.76 per share; as a result, IBM experienced a sell-off and reduced share prices due to its failure to meet the expectations created by the whisper number figure. Thus, even though IBM performed better than the consensus figure, it still suffered due to an unrealistically high whisper number that created higher expectations than were actually achieved.