Betting on an EPS Beat Isn't Enough. It's the Whisper That Really Matters.
Let's discuss the hidden power of whisper numbers — and five small-caps I’m buying on pullbacks.
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Reverse rotation continues for the third day on Tuesday. The Russell 2000 (IWM) is lagging with a loss of 0.3%, while the Nasdaq 100 (QQQ) is leading with a gain of 0.9%. Investors are rotating back into big-cap technology names such as Apple (AAPL) and Microsoft (MSFT) , which are due to report soon.
Betting on the Beat
Betting on an EPS beat has pretty good odds. Over the past 10 years, approximately 76% of S&P 500 stocks beat EPS estimates, and that has inched up to about 78% in the last five years. So far for 2025 fourth-quarter reports, the run rate is at about 75%.
While betting on an EPS beat carries good odds, that doesn’t mean the stock is going to trade higher. Many companies low-ball guidance, and that produces a "whisper" number, which is the real level of expectations. Research suggests that only about 45% to 50% beat the whisper number.
Why Whispers Matter
Whisper numbers are actually more accurate overall. One study shows that they missed actual numbers by about 21% versus a 44% miss for published consensus estimates.
What matters most is how the stock reacts. This is how things usually stack up:
| Scenario | Average Stock Reaction (Day 1) |
|---|---|
Beat Consensus + Beat Whisper | +2.0% or more |
Beat Consensus + Miss Whisper | +0.1% (flat to slightly up) |
Miss Consensus | Significant Selloff |
The Small-Cap Risk
This data is focused on S&P 500 stocks. Beating on earnings for smaller stocks is much more dangerous.
Many small stocks have little coverage and typically they have uneven financial results compared to mega-cap names. In many cases, I find it beneficial to trade small-caps after the report rather than in front of it.
Current Game Plan
I have my eye on a few pullbacks in my favorite names, but I am not doing a whole lot. At the top of my watch list right now are Lightpath Tech (LPTH) , ClearPoint Neuro (CLPT) , NeoVolta (NEOV) , Roku (ROKU) , and Emergent BioSolutions (EBS) .
Many of the smaller stocks are being hit due to the reverse rotation, but that scares folks and they end up dumping into the weakness. I believe it is just routine volatility and that small-caps will set up again for another run.
At the time of publication, Rev Shark was long LPTH, CLPT, NEOV, ROKU and EBS.
