Corporate earnings are the profits that a publicly-traded company makes, and they’re one of the most important factors in stock prices. In this article, we’ll explore what corporate earnings are, why they matter to investors, and how to analyze a company’s earnings report.

Corporate profit data is released four times per year by the Bureau of Economic Analysis (BEA) and is closely watched by Wall Street, policymakers, and business leaders. The BEA’s goal is to provide the public with accurate and timely data on national economy trends.

The most common measure of a company’s profitability is its net income, which is calculated by subtracting all operating expenses and taxes from a company’s total revenue. This figure is then divided by a company’s number of outstanding shares to yield its basic earnings per share (EPS) figure.

However, earnings per share can be distorted in a variety of ways. For example, suppose a company builds a factory on land that becomes more valuable over time due to local development, and it chooses to account for the increased value by using the original purchase price as its depreciation cost. This inflated number would make the company look much more profitable than it really is.

The specific metrics that analysts and traders focus on when analyzing earnings reports can vary by industry sector. Long-term investors might prioritize measures that provide insight into a company’s stability and growth potential, such as revenue trends and forward guidance. In contrast, short-term traders might pay more attention to the factors that can drive immediate market reactions, such as earnings surprises and changes in margins or costs.