What are core earnings?
Under S&P’s definition, they measure the earnings power of a company’s business. Core earnings represent the difference between the revenue of a company’s principal, or core, business and the costs and expenses associated with deriving that revenue. A simple example would be a chain of retail stores. The core business is running stores. Look at the revenues and the expenses from those stores, and you can find core earnings. While many retail chains may buy and sell real estate, that isn’t their main business. Neither is running a pension fund or many other things that such a company may do. S&P believes that for an equity investor to make an investment decision based upon a company’s reasonable earnings expectation, it’s necessary to understand how that organization’s core business will perform in the future. Each company and each industry is different, so how can you have a “one-size-fits-all” earnings definition? You can’t. But there can be one common goal for all accounting — a sta
