what are headline earnings 
headline earnings refer to a method of reporting corporate earnings based entirely on operational trading and capital investment activities achieved during the previous period excluded from the headline earnings figure are profits or losses associated with the sale or termination of discontinued operations fixed assets or related businesses or from any permanent devaluation or write off of their values understanding headline earningsheadline earnings provide a stringent measurement tool to isolate core operational profitability by excluding asset sales discontinued operations restructuring charges and write downs the headline earnings number shows the profitability of a company s core business because headline earnings make these exclusions it provides a better picture of a how company operates on an ongoing basis where one time charges or special items that are unlikely to occur again can give an unfair impression of true operations at the same time these items certainly do matter for analysts especially if they end up recurring or greatly impacting future prospects some companies report headline earnings per share eps in addition to required eps figures that take into account other items because it does not account for these items headline earnings are considered to be non gaap and must be reconciled with net income if presented in shareholder reports in accordance with sec regulations 1 this basis for measuring headline earnings per share was implemented in 1993 by the former institute of investment management and research iimr in the united kingdom 2 iimr developed this method as a way to better analyze a company s p l statement with a picture that would better represent a firm s operations during business as usual which could be clouded by a one time charge or write off criticism of headline earningsa company s quality of earnings is important so investors need to consider the validity of headline earnings and the exclusions that it makes on a case by case basis in order to avoid being misled or misinformed for instance research has shown that headline figures are more likely to exclude losses than gains gaap generally accepted accounting principles earnings now significantly trail non gaap earnings as companies become accustomed to including one time adjustments or charges which become problematic when they start to occur every quarter for example merck mrk turned a loss of 0 02 per share under gaap standards into an adjusted headline eps of 1 11 a share in the third quarter of 2017 a 5 650 difference 3 