Re: What a whisper number is - an authoritative definition
Our first source for a whisper number is a contact associated with the company. This may be an officer, employee, or an accountant working on the company. On occasion we might get information from a vendor or a corporate customer of the company's. If we are unable to obtain a whisper number through a source close to the company, we will query brokers that may have heard information about the company or a prominent (and sometimes not so prominent) investor that may have been given whispers about the company. The next step in our processes of obtaining whisper numbers is through voluntary input via email. During earnings season we have gotten as many as 100 email messages per day from those claiming to have information about a company. Some of these messages have proven to be reliable sources of upcoming earnings. We have recently put in place a method of verifying or authenticating anyone who submits whisper numbers through our online forms. Our last resort is to search message boards for information about upcoming whispers.
Finally, once we have a whisper number, we compare our number to analysts' estimates and the company's past performancees in respect to beating earnings estimates. We review which analyst has been the most accurate in the past and what his or her estimate is for the upcoming quarter. If we are uncomfortable with the source that has provided the whisper number, we will often adjust it so that it is more inline with the most accurate analyst.
You should keep in mind that similar to how larger companies have more analysts following them, we receive more information about larger companies. Therefore, we are more likely to be accurate with a large company. For example, the Wall Street Journal randomly selected 21 companies reporting earnings on October 14, 1998 (even though 30 is the standard minimum for statistical sampling). Of those 21 selections, the company that beat estimates by the highest margin was Apple Computers, Inc. The consensus estimate was $0.49 and we reported a whisper number of $0.74. The Wall Street Journal stated that an analyst following Apple at A.G. Edwards had also heard a whisper of $0.74, while Apple reported earnings of $0.68 per share. Of the 21 companies, the company that came in the most below estimates was Dover Corporation. The estimate for Dover was $0.46; we had a whisper number of $0.52; and Dover reported earnings of $0.42. Dover has fewer than half the number of analysts following it as Apple. Since both Apple and Dover dropped after they reported earnings, it can be reasonably said that those buying large amounts of the two companies were expecting earnings to be inline with our whisper number. This, in addition to A.G. Edwards' indication that they had the same whisper number (the source we mentioned earlier had $0.81) for Apple, helps verify that we published the same whisper number that the largest investors and institutions used. |
