A company announces earnings that beat the estimate, but the stock drops. How is this possible?
Answer: It can happen when investors are even more optimistic than the analysts’ estimate. They’re running around whispering that earnings might be even better than expected, which drives the stock up. Then, when earnings beat the estimate but don’t beat the “whisper number,” the stock drops.
Bottom line – investors compare actual earnings to expectations based on estimates, whisper numbers, company news, and subjective views. That comparison often drives the stock price once earnings are announced.