In the simplest sense, corporate earnings are the monetary profits that publicly-traded companies make over a given period. These profits then get redirected in one of two ways: they can be used to improve company operations, or they can be passed on to shareholders in the form of dividends or share buybacks. In either case, strong or weak earnings can reveal a wide range of market and economic trends.
Revenue and earnings are two important figures that should be analyzed together, as they offer different insights into company performance. Revenue growth can indicate that a business is expanding its customer base or sales volume, while earnings growth indicates that a company is efficiently managing its expenses. However, it is important to keep in mind that revenue and earnings can be impacted by one-time events such as the sale of a division or an asset write-down, so comparing results from period to period can distort the true picture.
Revenue and earnings are a critical part of a company’s financial statement, and investors and analysts watch them closely. Earnings reports also provide a window into future financial guidance, which can shape investor expectations and influence stock valuations. The relationship between earnings and stock prices has been a subject of active research since the 1960s, with early studies demonstrating that share prices react quickly to earnings reports, often beating or missing analysts’ forecasts. The Bureau of Economic Analysis (BEA) releases aggregate earnings data each quarter, providing Congress, policymakers, businesses, and individuals with reliable information about the economy’s private sector profitability.