What are headline earnings?

Headline earnings is a subset of the profits reported by a business. It only includes the following earnings:

• Profits or losses generated by operations
• Profits or losses generated by investment activities

Headline earnings does not include the following types of earnings:

• Profits or losses caused by the sale of assets
• Profits or losses caused by the termination of discontinued operations
• Profits or losses caused by write-downs in the value of assets
• Profits or losses caused by reductions in the number of employees

Headline earnings are useful for a financial analyst who wants to determine the earnings level of the core day-to-day operations of a business, without other ancillary transactions cluttering up the earnings information. It is also useful for comparing the results of the core operations of similar businesses.

The concept can also be applied to earnings per share to arrive at headline earnings per share. However, this presentation is not allowed under Generally Accepted Accounting Principles or International Financial Reporting Standards.

For example, ABC International reports $100,000 of earnings in its most recent quarter, which includes a $10,000 gain on the sale of fixed assets and a $30,000 impairment charge on other fixed assets. The headline earnings for ABC would be $120,000, which factors out the two transactions just noted.

Related Topics

Income statement overview 
Basic earnings per share
Diluted earnings per share 
Other comprehensive income
What are pro forma earnings?