Largest Median Difference Between Non-GAAP EPS and GAAP EPS for DJIA Companies in 3 Years

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 nonoperating 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 Q4 2023. What percentage of these companies reported non-GAAP EPS for Q4 2023? What was the median difference between non-GAAP EPS and GAAP EPS for companies in the DJIA for Q4 2023? How did these differences compare to recent quarters?

For Q4 2023, 24 (or 80%) of the 30 companies in the DJIA reported non-GAAP EPS in addition to GAAP EPS for the fourth quarter, which is above the 5-year average of 22 (or 73%). Of these 24 companies, 20 (or 83%) reported non-GAAP EPS that exceeded GAAP EPS, which is above the 5-year average of 16.

The median difference between non-GAAP EPS and GAAP EPS for these 24 companies was 31.0%, which is above the 5-year median difference of 11.7%. In fact, this quarter marked the first time the median difference between non-GAAP EPS and GAAP EPS for companies in the DJIA exceeded 30% since Q4 2020. It also marked the fourth highest median difference between non-GAAP EPS and GAAP EPS for the DJIA since FactSet began tracking this metric in 2016.

A list of the 10 companies in the DJIA for which non-GAAP EPS exceeded GAAP EPS by the widest margins in Q4 2023 can be found below. For companies that reported a GAAP loss, the absolute value was used for comparison.

Due to an unexpected schedule issue on March 1, The FactSet Earnings Insight report was published one day early on February 29. The next edition of the report will be published on March 8.

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