It has now been more than 80 years since Benjamin Graham and David Dodd published their book "Security Analysis" which was, in part, about the importance of properly measuring a company's earnings for proper stock selection. 35 years later, Ray Ball and Phillip Brown published their paper "An Empirical Evaluation of Accounting Income Numbers" identifying the phenomenon of Post-Earnings Announcement Drift (PEAD), showing that stocks outperform the market after reporting earnings above earnings estimates and they underperform if they miss estimates. Another 30 years later, Mark Bagnoli, Mesod Daniel Beneish, and Susan Watts published their paper "Whisper Forecasts of Quarterly Earnings per Share" pointing out that a stock's outperformance/underperformance after earnings has more to do with whisper numbers than consensus estimates.
Since then, we've published 109,439 Earnings Whisper ® numbers based on expectations from 11,534 professional analysts. We've also collected 11,313,756 sentiment readings from 1,039,613 individual investors and studied 506,978 earnings releases and 128,258 guidance announcements. Basically what we’ve learned is Richard Bernstein was right back in 1995 when he pointed out the key to outperforming the stock market is identifying where a stock is within the Earnings Expectation Life Cycle and that the best way to do that is using a combination of professional expectations and investor sentiment.
The Earnings Whisper Grade identifies where a stock is in the Earnings Expectation Life Cycle with the A+'s being in the Positive Earnings stage and, on average, gaining 7.81% from two days following the earnings release until the close just before its next earnings release - outperforming the overall stock market by 212%. Stocks with an Earnings Whisper Grade of F have traded lower by an average of -1.29% during the quarter even though the overall stock market has been up.
We've also learned over the years that not all stock market participants have the time to take advantage of the initial short-term reaction to an earnings beat or miss, so the Earnings Whisper Grade is at the heart of our Investor Services allowing investors with a longer-term horizon to capture the Post-Earnings Announcement Drift with less trading activity.
Investor subscribers get:
- Access to the Earnings Whisper Calendar, which includes the Earnings Whisper Score to measure the likelihood the stock will move higher or lower ahead of earnings
- The Whisper Report – a weekly newsletter discussing the current trading environment and upcoming earnings releases
- A list of all daily earnings releases, including the Earnings Whisper Grades used to measure the likelihood of a Post-Earnings Announcement Drift
- Emailed alerts for those stocks reporting results with an A+ Earnings Whisper Grade
- A list of all passing Earnings Whisper Grades for the quarter
- A daily list of all stocks trending on the positive side of the Earnings Expectation Life Cycle while also seeing favorable price trends
- A watchlist of up to 100 stocks with the Earnings Whisper Grade, the Earnings Whisper Score, Short interest data, emailed alerts of earnings news, and more
- Download data from the Earnings Calendar and your watchlist