San Francisco, California – A recent analysis of Street Earnings in the first quarter of 2024 for S&P 500 companies reveals a discrepancy that may have significant implications for investors. The study shows that for 122 of these companies, Street Earnings, based on Zacks Earnings, are actually lower than their true profits, known as Core Earnings. This finding suggests that these companies may be more profitable and undervalued than previously believed.

The report not only highlights the magnitude of the discrepancy between Street Earnings and Core Earnings but also delves into why this discrepancy exists and how it impacts investors. In addition, the analysis identifies five S&P 500 companies with understated Street Earnings that also have attractive or better stock ratings.

According to the study, the 122 companies with understated Street Earnings make up 29% of the total market capitalization of the S&P 500 as of May 16, 2024. This percentage is slightly lower than in the previous quarter, indicating a trend in how companies report their earnings and how investors perceive their value.

It is worth noting that the analysis was based on a thorough examination of financial statements and footnotes from approximately 3,000 10-Ks and 10-Qs filed with the Securities and Exchange Commission after the earnings season. The cost of such analysis for most companies is estimated to be over $2 million each quarter.

Furthermore, the study reveals that for 41 companies, Street Earnings are understated by more than 10% compared to Core Earnings. These 41 companies represent 6% of the total market capitalization of the S&P 500 as of May 16, 2024, emphasizing the significance of accurate earnings reporting.

In conclusion, the analysis sheds light on the importance of considering Core Earnings alongside Street Earnings when evaluating the profitability and valuation of companies. By uncovering discrepancies in earnings reporting, investors can make more informed decisions and potentially identify opportunities in undervalued stocks in the market.