The Whisper Game

How did beating the consensus earnings forecast become the least of your problems?

At a time when finance executives have become adept at managing Wall Street expectations, a new hurdle has entered the realm of investor relations: whisper numbers.

And unlike the estimates of a cadre of analysts, whisper earnings expectations have a secret life of their own. “With the whisper-number culture, you are expected to exceed expectations,” says one CFO, who prefers to remain anonymous. “But I can’t manage what I can’t see. You end up chasing your tail. The only way you can possibly obtain market satisfaction is to publish infinite earnings. We can’t meet that consensus. We’re going to come in below infinity.”

As unpredictable and unreasonable as they are, whisper numbers seem increasingly ingrained in the corporate-earnings scene. As the unofficial, off-the-record forecasts of what a company will earn in a quarter, traditionally whisper numbers have referred to the revised expectations certain Wall Street analysts share with favored clients but don’t put in their widely disseminated research reports. “The whisper number is what you think will really happen,” says one analyst, who requested anonymity. “I’ll tell investors, but I won’t change my official estimate.”

More recently, individual investors have been getting into the game with earnings estimates posted on the Internet that are now being aggregated by Web sites, such as and Although this companion set of predictions is typically more optimistic than the analyst consensus published by First Call, IBES International Inc., and Zacks Investment Research, it is often more accurate and can serve as a reasonable predictor of stock movement.

During the April earnings season, for instance, Wall Street had Yahoo Inc. making 9 cents a share, which it beat by a penny. But the 19 “whispers” compiled by had the Internet portal company at 10 cents, and Yahoo shares fell 18 percent over the next five days. In contrast, Sun Microsystems Inc. saw its stock price soar 13 percent after it posted earnings of 26 cents a share; it beat both the whisper number and the analyst consensus, though the individual investors’ forecast of 24 cents was closer to the actual than the analysts’ 23 cents.

“We want to tap into what online investors are thinking and feeling, because we believe they are starting to define market sentiment,” says Paul Hauck, co-founder of, who charges that the First Call consensus has lost credibility as an unbiased forecast because of the earnings-management game that analysts and executives play. “We want the market to view the whisper numbers we publish as a valid number, not just some figure that comes out of the blue.”

Critics, however, contend that such sites offer nothing more than an unscientific poll of self-selected respondents who don’t put their names on their estimates or reveal how they came up with their numbers. “If you think of these whisper numbers as a poll of market watchers, and use it as a sentiment indicator, fair enough; it’s an interesting number,” says Scott Rosen, director of research at IBES, a market-data collection firm in New York. “To consider them a true predictor of anything is unwise.”


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