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How Much Did Non-GAAP EPS Exceed GAAP EPS for the Dow 30 in Q3?

Earnings

By John Butters  |  November 22, 2019

While all publicly traded U.S companies report EPS on a GAAP (generally accepted accounting principles) basis, many U.S. companies also choose to report EPS on a non-GAAP basis. There are mixed opinions in the market about the use of non-GAAP EPS. Supporters of the practice argue that it provides the market with a more accurate picture of earnings from the day-to-day operations of companies, as items that companies deem to be one-time events or non-operating in nature are typically excluded from the non-GAAP EPS numbers. Critics of the practice argue that there is no industry-standard definition of non-GAAP EPS, and companies can take advantage of the lack of standards to exclude items that (more often than not) have a negative impact on earnings to boost non-GAAP EPS.

As of today, all of the companies in the Dow Jones Industrial Average (DJIA) have reported actual EPS for Q3 2019. What percentage of these companies reported non-GAAP EPS for Q3 2019? What was the median difference between non-GAAP EPS and GAAP EPS for companies in the DJIA for Q3 2019? How did these differences compare to recent quarters?

For Q3 2019, 20 (67%) of the 30 companies in the DJIA reported non-GAAP EPS in addition to GAAP EPS for the third quarter. Since 2016, 73% of companies in the DJIA have reported non-GAAP EPS in addition to GAAP EPS on average. Of these 20 companies, 14 (70%) reported non-GAAP EPS that exceeded GAAP EPS. Since 2016, 75% of companies in the DJIA reported non-GAAP EPS that exceeded GAAP EPS on average. The median difference between non-GAAP EPS and GAAP EPS for all 20 companies was 7.7%. Since 2016, the median difference between non-GAAP EPS and GAAP EPS has been 10.9%.

Number of DJIA Companies reporting Non GAAP EPS

Thus, the number of companies in the DJIA reporting non-GAAP EPS, the number of companies reporting non-GAAP EPS exceeding GAAP EPS, and the median difference between non-GAAP EPS and GAAP EPS for Q3 2019 were all slightly below the average (or median) quarterly numbers since 2016.

DJIA Median Difference Non GAAP vs GAAP EPS

DJIA: Top Five Non-GAAP EPS > GAAP EPS for Q3 2019

Company

Ticker

Non-GAAP EPS

GAAP EPS

Difference (%)

Walt Disney Company

DIS

1.07

0.43

148.8%

Merck & Co., Inc.

MRK

1.51

0.74

104.1%

Dow, Inc.

DOW

0.91

0.45

102.2%

Walgreens Boots Alliance Inc

WBA

1.43

0.75

90.7%

United Technologies Corporation

UTX

2.21

1.33

66.2%

 

 

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John Butters

Senior Earnings Analyst

John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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