Whispers numbers carry clout

November 5, 2009 | By Jim Kim

There have been a whole lot of earnings hits and misses as of late. Do the analysts' published estimates mean anything any more? Or have they been eclipsed by whisper numbers? Traders often talk up--or whisper up--their own forecasts to gain an edge. These whispers can loudly reverberate at a time when earnings forecasting is hard, especially in financial services.

Reuters notes the case of Goldman Sachs' third quarter numbers. The bank's shares sold off after announcing that third-quarter net income rose to $5.25 a share vs. the average estimate of about $4.25 a share--a huge upside "surprise." Unless you take the whisper numbers into account. They were even higher, around $6.00 per share.

The same thing happened to IBM. The whisper numbers tend to be higher than the analysts' average, and as long as the published estimates are seen as somehow unreliable--for whatever reason--the trading floor will get other numbers out there for their own reasons.

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