It’s no secret that investors and Wall Street alike don’t believe GAAP net income represents the best measure of a company’s profitability. How else could you explain the heavy usage of non-GAAP, whisper numbers, and Street Earnings? In fact, we’ve long pointed out how GAAP numbers are misleading, largely because of the numerous loopholes that open the door for legal earnings manipulation.
To “correct” GAAP earnings, investors regularly turn to Street Earnings[1], which are marketed as being adjusted to remove unusual income and charges to calculate a more accurate measure of earnings.
However, our Core Earnings[2] show Street Earnings often fail to account for a material amount of unusual income and charges, which distorts investors’ view of profitability across the S&P 500.
Rather than rely on flawed GAAP or Street Earnings, we leverage our Robo-Analyst, the AI Agent for investing, to scour the footnotes and MD&A of financial filings to calculate Core Earnings, a proven superior measure of earnings. In this report, we’ll show:
- the prevalence and magnitude of overstated GAAP Earnings in the S&P 500,
- that Street Earnings (and GAAP earnings) are flawed and not adjusted as promised, and
- the five S&P 500 companies with overstated Street Earnings most likely to miss 2Q25 earnings.
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