Corporate earnings are the ‘bottom line’ of a company, reflecting how much profit remains after covering operating costs like salaries and taxes. They are one of the most important factors driving stock prices, and they are closely tracked by investors, policymakers, the media, and other market participants.
Companies report earnings four times per year, and their results are often highly anticipated by investors. This anticipation can cause market reactions, whether they are positive when a company reports better-than-expected results or negative when a company misses expectations. Earnings reports also provide valuable insight into a company’s operations and future potential by offering information like margins, forward guidance, and EPS.
The Bureau of Economic Analysis provides corporate earnings data for investors, Congress, policymakers, and business analysts to understand the economic impact of business activity in the United States. It provides the most current and comprehensive information on corporate profits available, including a detailed breakdown of the various components of reported net income.
Investors care about a company’s earnings because they are the primary driver of stock prices. When a company is making money, it can use that cash to invest in new products and technology or pass the wealth onto its shareholders in the form of dividends or share buybacks.
But not all earnings are created equal. Some may be inflated by accounting quirks that don’t reflect true long-term value creation, while others might be subject to temporary shocks that don’t accurately represent the overall economy.