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Smallest Difference Between Non-GAAP EPS and GAAP EPS for DJIA Since 2016

Companies and Earnings

By John Butters  |  September 4, 2018

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.

Number of Companies Reporting GAAP Estimates

As of today, all of the companies in the Dow Jones Industrial Average (DJIA) have reported actual EPS for Q2 2018. What percentage of these companies reported non-GAAP EPS for Q2 2018? What was the median difference between non-GAAP EPS and GAAP EPS for companies in the DJIA for Q2 2018? How did this difference compare to recent quarters?
Company Breakdown

For Q2 2018, 23 (or 77%) of the 30 companies in the DJIA reported non-GAAP EPS in addition to GAAP EPS for the second quarter. Since Q1 2016, 71% of companies in the DJIA have reported non-GAAP EPS in addition to GAAP EPS on average. Of these 23 companies, 14 (or 61%) reported non-GAAP EPS that exceeded GAAP EPS. Since Q1 2016, 79% of companies in the DJIA have reported non-GAAP EPS that exceeded GAAP EPS on average. The second quarter marked the lowest number of companies in the DJIA reporting non-GAAP EPS that exceeded GAAP EPS since FactSet began actively tracking this metric for the DJIA in Q1 2016.

DJIA Median Difference Non-GAAP EPS vs GAAP EPS

As a result, the median difference between non-GAAP EPS and GAAP EPS for all 23 companies was 5.4%. Since Q1 2016, the median difference between non-GAAP EPS and GAAP EPS has been 13.6%. Thus, the second quarter marked the lowest median difference between non-GAAP EPS and GAAP EPS since FactSet began actively tracking this metric for the DJIA in Q1 2016. The list of the nine companies in the DJIA that reported non-GAAP EPS that was lower than or equal to GAAP EPS can be found below. All metrics reflect GAAP EPS (and non-GAAP EPS) from continuing operations when provided.

DJIA: Q2 2018 Non-GAAP EPS Equal To or Below GAAP EPS (Source: FactSet)

COMPANY

TICKER

NON-GAAP EPS

GAAP EPS

DIFFERENCE (%)

 United Technologies Corporation

UTX

1.97

2.56

-23.0%

 3M Company

MMM

2.59

3.07

-15.6%

 Cisco Systems, Inc.

CSCO

0.70

0.81

-13.6%

 Boeing Company

BA

3.33

3.73

-10.7%

 Travelers Companies, Inc.

TRV

1.81

1.92

-5.7%

 Walt Disney Company

DIS

1.87

1.95

-4.1%

 Intel Corporation

INTC

1.04

1.05

-1.0%

 Microsoft Corporation

MSFT

1.13

1.14

-0.9%

 Chevron Corporation

CVX

1.78

1.78

0.0%

 

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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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