Analysts and the rest of the Wall Street community spend a lot of time eagerly waiting for reports and financial information with the same eagerness your local Comic-Con goers await the newest Star Wars trailer. And both sci-fi junkies and analysts have lots of expectations. The sci-fi fans might expect the latest special effects, while money guys might expect that companies will post certain earnings or reach certain benchmarks on other metrics. These Wall Street predictions are known as "analyst expectations."
Analyst expectations are also known as "Street Numbers," or sometimes, collectively, as the "consensus estimate." These figures represent the numbers that money folks think a company will post for their quarterly earnings or other estimates—before said company actually posts the numbers.
Example: Let's say Cisco has told the Wall Street analysts (employees who work for brokerage houses to provide "expert" advice to investors) that it expects to earn 40-45 cents a share on $10.5-11 billion in revenues. One analyst publishes that they expect 43 cents on $10.652 billion; another analyst publishes that they expect 40 cents on $11.1 billion, etc. These individual estimates are then compiled into a consensus estimate that's used to judge the final result. When you see headlines like "Cisco Beats Expectations With Earnings Report" these are the estimates being referenced. See Whisper Number, Buy Side, and Sell Side for more gory details.
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Finance: What is a whisper number?16 Views
Finance allah shmoop what is ah whisper number all right
this is but hair implants it's going to be the
next amazon Trust me anyway be h i is trading
at one hundred times earnings five times the price to
earnings multiple of the average growth stock today trading it
twenty times earnings last year be h i earned a
dollar a share It has a buck or two a
share in cash and no debt It has communicated a
wall street through its quarterly conference calls and meetings with
analysts that it's coughing lee hopes to earn a dollar
fifty this year a dollar to a dollar fifty what
we did there with the word coughing Lee you know
it's not from these cohibas we cough because they cough
when they say a dollar fifty Why Well because we
do the math on a few of the key metrics
they've given us Like they said we're opening another two
thousand stores in eastern europe almost double our number in
the u s today and they say we're supply constrained
just not enough but hair to go around so we're
shopping for more Apparently slovenia has had excellent harvest this
year and then they say people are growing older boulder
and yeah there really is something about all that wifi
in carrying cellphones in your pocket all the time yeah
that's what they say and that was the recording of
them saying it really we were there All right so
if you had everything up and put the above data
and a few other teen nuggets of information you've gleaned
about their hair growth industry perspective well then your financial
model would show earnings this year something more like three
or even four dollars a share not that paltry dollar
fifty that they're telling everyone they hope to make if
they try really hard So you wonder why on earth
would the cfo of but harry implants guide analysts in
making them believe the company would only earn a dollar
fifty when she and everyone around her thinks that more
likely the number is going to be three or four
bucks a share in earnings this year Well lawsuits for
one puns of ambulance chasing scummy lawyers out there claiming
they're acting in the best interest of you know bubba
shareholder they're just waiting for a stock to drop and
then they sue the company for you know stuff and
then there's other things not communicating well enough not marketing
well enough of not being able to predict the supply
line of their butt hair well enough Yeah you name
and the lawyers will see you for it Cos also
love being heroes and they love beating their estimates toe
wall street all the time It just makes him you
know feel good under promise over Deliver that thing All
right So along comes first quarter's earnings and last year's
first quarter showed earnings of sixteen cents a share Your
went by quarter like this sixteen twenty three one nine
Thirty There you go So the street is expecting at
least thirty two cents in earnings this quarter It'd be
growth of one hundred percent over the period a year
ago But one hundred percent growth from last year would
give the company earnings of two dollars a share So
that's not what the street is really thinking when it's
paying one hundred dollars a share for this stock If
they were actually thinking the stock would really print on
ly two dollars a share in earnings the stock would
probably not be trading for one hundred boxes share and
probably more like fifty there's nothing trades at fifty times
actual earnings or at least not fifty times what wall
street actually thinks the company will print The number of
the street is whispering It took us a long time
to get there the whisper number thing but we did
is forty cents a share in earnings there whispering that
the company says they'll dio something less than forty but
they better hit forty cents because that's what everyone's whispering
about If the company hits forty cents in its first
quarter's earning to report while learning through the rest of
the year could go something like this you know forty
fifty sixty seventy and then that would produce to twenty
years share in earnings and i would be the absolute
minimum the company would need to keep anything close to
its huge multiple or stock price It probably needs more
earnings growth to stay triple digits something like maybe forty
sixty eighty eight dollars something like that and then you're
in the three dollars in change number and that would
work a lot better because then you're only treading it
Like twenty eight times earnings which is not some astronomical
multiple Got it all right Well the key idea here
is that the whisper number is the rial number that
actual investors care about the company hitting not what the
stockbrokers sell Side analysts published in their earnings estimates that
they hoped the company would earn thirty two cents Blah
ba blah ba blah Yeah can't trust your stockbroker in
that setting So the key idea here is the number
that matters is the whisper number whisper number because on
wall street you don't always die with a yell sometimes
it's just with a whisper like that so that's a
whisper number Now go out and buy a bunch of
b h i stock and remember i'm not on ly 00:04:50.415 --> [endTime] but harry implants client I'm also the president
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