A Note on Adjusted EPS Numbers

Walmart filed its latest quarterly earnings release today, so of course we took a peek to see how the world’s largest retailer and economic bellwether performed. 

The news was decent enough. Revenue up 5.8 percent from the year-ago period, net income up 29.1 percent, and EPS 35.1 percent. Operating income was down 0.2 percent, but that’s due to a one-time charge related to an upcoming spin-off; adjusted operating income without that charge was up 8 percent.


We kept skimming through the earnings release and then came to this:


Adjusted EPS of $0.62 excludes the effect, net of tax, of $0.20 gain on equity and other investments and $0.02 related to settlement of a certain legal matter, partially offset by $0.07 of incremental share-based compensation expense…


Hold up. Walmart ($WMT) reported an adjustment to GAAP of $0.20 because of a one-time gain on equity and other investments. Two weeks ago, we had a post about Amazon’s ($AMZN) latest quarterly results, noting that half of Amazon’s net income came from adjustments on equity (specifically, a mark-up in the value of Amazon’s equity stake in Anthropic).


So if Walmart reported an adjusted EPS number based on gains in equity and other investments, we wondered — what adjusted EPS number did Amazon report for its own equity gains? 


Spoiler: Amazon does not report adjusted EPS at all! 


Look for yourself if you’d like. Amazon’s Q3 earnings release does not include an adjusted EPS number. It does not include the word “adjusted” anywhere in the text at all. In fact, Amazon reports hardly any non-GAAP disclosures, other than Free Cash Flow. 


Filers that report non-GAAP financial metrics are supposed to reconcile those numbers back to their nearest GAAP counterpart, and Amazon does provide a reconciliation for net income to net cash from operating activities. But since that’s the only non-GAAP disclosure Amazon reports, that’s the only reconciliation analysts get.


This leaves financial analysts in a tricky place. Companies typically aren’t required to disclose non-GAAP metrics; we can’t say Amazon is doing anything wrong here. But Walmart is reporting a non-GAAP adjustment to EPS for gains in equity holdings and Amazon isn’t. 


So if you just compare standard EPS for both companies ($1.95 for Amazon, $0.77 for Walmart), you’re missing a significant part of the EPS picture: how much those EPS numbers depend on equity gains rather than operating income. If you want to compare adjusted EPS to have a better sense of that complexity — well, you can’t. Amazon doesn’t report it.


The only way you could capture that nuance, so you can have a true apples-to-apples comparison, would be to extract the Other Income number from both companies and model an estimate of adjusted EPS yourself. With Calcbench that’s easy enough; you can use our Excel Add-in or API. 


Our point is simply that financial analysts need to perform that level of “data due diligence.” A cursory look at the earnings release or the Statement of Income won’t cut it.

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