The Difference Between GAAP And Non-GAAP Q3 Earnings For The Dow Jones Was 25%

As of today, 95% of the companies in the S&P 500 have reported earnings for Q3 2016. 72% of the companies have reported earnings above the mean estimate and 55%of S&P 500 companies have reported sales above the mean estimate. More importantly, however, according to FactSet in Q3 the earnings recession officially ended after five consecutive quarters of EPS declines: for Q3 2016, the blended earnings growth rate for the S&P 500 is 3.0%. The third quarter marks the first time the index has seen year-over-year growth in earnings since Q1 2015 (0.5%).
That’s the official version. The unofficial one is that of this 3% increase in EPS, half comes from buybacks, or a reduction in the number of shares outstanding, which according to Deutsche Bank contributed 1.6% to earnings growth in the third quarter. As the chart below shows, this has been a recurring theme for the S&P, where buybacks have “added” between 1% and 2% to EPS “growth” every quarter going back at least to the start of 2012.

And then there was the very acute distinction between GAAP and non-GAAP, one of our favorite topics which we have covered going as far back as 2010, and more recently in February of this year.

This post was published at Zero Hedge on Nov 19, 2016.