Regardless Next Year’s Elevated Earnings Expectations Come Through Or Not, Gap Between GAAP And Non-GAAP Persists

Even if next year’s estimates are realized, there is not going to be much improvement in a trend that has plagued US corporate earnings for a while. Over the years, the gap between GAAP and non-GAAP earnings is getting starker. Both are important in their own right. It is very possible non-GAAP tends to overstate earnings, while GAAP does the opposite. On balance, the lesser the discrepancy between the two the higher the quality of earnings.

In this respect, S&P 500 companies this year are expected to realize $93.36 in reported earnings. The $27.45 gap with operating earnings is the widest ever since 2008. During recessions, GAAP earnings collapse as companies take asset write-downs, etc. That said, although the economy is expected to grow in the four to five percent range, the gap between GAAP and non-GAAP next year is only expected to narrow to $23.63 (Chart 4).

Thanks for reading!

1 2
View single page >> |

This blog is not intended to be, nor shall it be construed as, investment advice.  Neither the information nor any opinion expressed here constitutes an offer to buy or sell any security or ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.