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Yahoo!, Inc. had nothing but good news for its investors when it issued its third quarter earnings figures of 14 cents, beating the analysts' consensus by a whole five cents. But unofficial figures, or whisper numbers, from a relatively new and growing website, were more on the button. It predicted earnings of 11 cents two weeks prior to the October 6 announcement, and upped it to 12 cents in the last few days before the date.
Internet-based financial information company WebTools LLC's earnings prediction site EarningsWhispers.com reckons it has a 63% success rate in predicting first quarter earnings. It has already recently topped 100,000 subscribers, and is currently adding 1,000 more a day. Furthermore, it is threatening to turn an earnings surprise into an earnings shrug.
For example, out of the 2,519 companies that EarningsWhispers.com examined in April, 1,580 of the site's whisper numbers were either closer to the actual earnings figures, or off by the same amount, as analysts' consensus estimates, according to WebTools Co-Founder Shannon Puls.
The site, which has been around since August 1998, gets its whisper numbers from a variety of sources. These are primarily analysts, but also include company employees and accountants, message boards, and even a company's corporate customers to obtain a general consensus, which it then compares to analysts' consensus estimates.
The majority of the reason why earnings consensus figures are off by so much is because analysts have a better idea two weeks or two days before a company releases its earnings than they do 90 days prior to the event, according to Puls.
"Earnings consensus figures are updated automatically, but they rely on analysts' published figures. But there is so much new information two weeks prior that there isn't always time to put it all through their complex calculations, so analysts make a best guess. That's what the whisper number is," he explained.
Contradicting Earnings
But others are doubtful what reason analysts would have for contradicting their own earnings estimates, and threatening the credibility of their employers, by telling a relatively unknown whispers site what their best guess would be.
"This type of informationhearsay, whispers and so forthhas never been formalized, and we don't focus on information that can't be formalized. Our job is to...