By Philip Elmer-DeWitt
January 23, 2012

Averaging the Q1 2012 estimates of the six analysts with the best track records

Whisper numbers, according to Wikipedia, emerge from widening cracks in the spreadsheets maintained by Wall Street analysts. Quoting an article by Daniel Svensson, the entry explains:

“When the estimate is first calculated by sell-side analysts, the number is submitted to companies such as First Call to be averaged with other analysts’ estimates for the consensus earnings estimate. As new information is made available and plugged into the spreadsheet, the calculation may change several times leading up to a company’s actual earnings release. However, the analyst is generally not going to issue a new report and revise his or her published estimate with each new calculation, resulting in the analyst’s true expectations differing from his or her published number. Therefore, when someone within the firm, an institutional client, or even a retail client asks the analyst his or her expectation for the company, the response is often different than the published estimate. This number then gets passed among trading desks and professional traders as the whisper number.”

Case in point: Katy Huberty’s team at Morgan Stanley, which calculated its Q1 2012 estimates for Apple (AAPL) on Oct. 19, right after the company reported its Q4 2011 earnings, and never updated them — despite, as the note Huberty sent to clients last Thursday makes clear, strong evidence right before their eyes:

“Our US holiday survey and intra-quarter comments from AT&T and Verizon indicated stronger iPhone demand than we initially expected, and give us conviction that iPhone units will beat our estimate of 30 million. We believe Apple also has a good chance of exceeding our estimate of 13 million iPads as our US survey suggests demand remained strong in the quarter despite the Amazon Fire launch. We expect Mac units to be roughly in-line with our estimate of 4.9 million, according to preliminary IDC data (though we note the original Street estimate of 5.0M may be too aggressive). We also see about 100bps of gross margin upside to our estimate of 40.4% due to a higher mix of iPhone revenue in the December quarter and better iPhone yields given limited changes from iPhone 4 to 4S.”

That’s why if we were to bet on Apple (which we don’t) we’d stick with the folks who do revise their numbers as new information comes in. The estimates posted above are the averages of the six analysts — institutional or independent — whose revenue and earnings estimates were closest to the mark over the past four quarters. We tried this last quarter and it backfired (see here). For other approaches, see or

Below the fold: The spreadsheet from which our whisper numbers were derived. (See Can Apple still deliver an earnings surprise? for our analysis of that.) We’ll publish a best-and-worst analyst list in our quarterly Earnings Smackdown when Apple’s numbers come in. Tune in Tuesday after the markets close.

UPDATE: We adjusted our numbers slightly Tuesday morning when we realized that we’d neglected to factor in the estimates of the one institutional analyst — J.P. Morgan’s Mark Moskowitz — whose predictions over the past four quarters were prescient enough to land him in the top six.

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