What is earnings per share (EPS) in US stock markets?
EPS measures a US company's net profit divided by its diluted share count, and is the primary metric against which Wall Street analyst consensus estimates are benchmarked each quarter.
Earnings per share (EPS) is net income attributable to common shareholders divided by the weighted-average number of shares outstanding. In the US market, it is the most widely cited profitability metric for individual companies and the primary basis on which analyst consensus expectations are set each quarter.
US companies typically report two EPS figures. Basic EPS uses the weighted-average shares outstanding during the period. Diluted EPS adds in shares that could be created from outstanding stock options, convertible bonds, and restricted stock units, giving a more conservative figure that accounts for potential dilution. Analysts and the financial media typically focus on diluted EPS.
US companies also commonly report non-GAAP EPS, which strips out items management deems non-recurring — restructuring charges, acquisition costs, stock-based compensation, and similar items. Non-GAAP EPS is almost always higher than GAAP EPS, and the gap between them has widened over the past decade, particularly in technology companies where stock-based compensation is a large and recurring expense. Investors should scrutinise non-GAAP adjustments carefully rather than accepting them at face value.
The quarterly earnings season — roughly the four- to six-week period following the end of each calendar quarter — is when the majority of S&P 500 companies report results. The key variable is not whether a company grew earnings, but whether it beat or missed consensus estimates compiled by data providers such as Bloomberg, FactSet, and Refinitiv. Companies that beat estimates and raise guidance tend to see their shares rise; those that miss or guide down often fall sharply, regardless of whether earnings grew in absolute terms.