When a company announces quarterly earnings, analysts and investors often focus on the non-GAAP or adjusted earnings number.
These adjusted numbers exclude items that management deems not reflective of ongoing operations.
For example, if a company has to write-off equipment or the value of certain financial securities, earnings will take a hit. But the adjusted number will add back this negative impact.
Critics argue that adjusted earnings obscure the true nature of corporate profitability
In a new report examining corporate profits, UBS strategist Julian Emanuel once-again observes that earnings quality has improved significantly since the financial crisis.
He included this chart of S&P 500 company write-offs, which are down sharply.
Emanuel previously noted to Business Insider that the spike in write-offs around 2009 was primarily due to distress in the financial sector.
There’s always something being written off in corporate America.
But like Emanuel said, earnings are cleaner.