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Definition of 'S&P Core Earnings'
The Standard and Poor's revised version of the measurement of core earnings, which excludes any gains related to pension activities, net revenues from the sale of assets, impairment of goodwill charges, prior-year charge and provision reversals, and settlements related to litigation or insurance claims. Expenses related to employee stock option grants, pensions, restructuring of present operations or any merger and acquisition costs, R&D purchases, write-downs of depreciable or amortizable operating assets, and unrealized gains/losses from hedging activities are all included in the core earnings.
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Investopedia explains 'S&P Core Earnings'
This is a new standard created by S&P with the assistance from the financial and investment community. These core earnings provide for transparency and consistency, as well as a more stringent definition of a company's core earnings, clearly setting out exactly what can and cannot be considered earnings and expenses.
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This metric is an attempt to counteract creative accounting, but it poses its own set of challenges.
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A look at the five varieties of EPS and what each represents can help an investor determine whether a company is a good value, or not.
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