Headline Earnings
Categories: Stocks, Company Valuation, Banking
It's the earnings number that companies print when they actually report earnings. Duh.
But not so duh. Why?
Because often those headline earnings are misleading. "SoNSo.com announces earnings of $1.42 a share.*" And you see that asterisk there.
That $1.42 was highly unexpected.
The Street was expecting more like $1.10. So the headline of that 32-cent-a-share outperformance was huge.
For about 3 minutes. Then Street analysts read the link to the asterisk which noted "These earnings numbers don't include tons of expenses we actually had, and they ignore other accounting things and really aren't GAAP compliant, so you shouldn't think of them as, ya know, earnings earnings."
And some clever bean counter does quick math and realizes that the company (had they used GAAP rules), only had 72 cents a share in real earnings.
And yes, that's just one reason companies are required to announce earnings "off hours" when their shares aren't actively being traded, or you can imagine the scenario where someone sees this big number and buys the crap out of the stock, only to watch it plummet shortly thereafter when the real math is done by the pros.